so heres the dealio. got an exam tomorrow. Im moderately screwed, so im asking for advice from you smart economics students.
I have been given stimulus for the essay: www.alp.org.au/media/0308/mssitres160.php
The essay question will probably be something to do with how increasing minimum wage will effect the economy and the current financial crisis etc. so umm what effect will that have??? anyone???????
Well, it could help the economy by allowing people to spend more money, however it could also raise inflation. You might want to try paying attention in class.
Increasing min wage is bad for the economy but good for the government. I employ many min wage employees, they will tell you the same thing. Generally small business pays min wage, if we could afford to pay more we would.
1.Increasing min wage means increase of cost of goods sold so a price increase would have to happen. When the price goes up the tax goes up as well. ex 8% tax on 1$ is $.08 tax on say $1.50 (new price after wage increase) is now$.12. Said worker does have more money to spend BUT his new wage will still only buy the same amount of goods do to the cost increase.
2. Good employees deserve rewards mediocre employees dont. I would rather be able to reward my hard workers by giving them a $1 per hour raise but if i'm forced to pay everyone $.50 per hour my labor percentage still has to stay inline or I will go OB so I wont be able to give the good employee the raise he deserves possibly causing him to find another job.
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If the Labor party raise the minimum wage its more likely to be because of their association with unions than to help the economy.
Make sure you use the minimum wage diagram, AD and AS with the minimum wage line.

Err make sure you throw some disadvantages in, essays need to consider both sides. Profit repatriation comes into my head, e.g. foriegn workers will also be earning more but they may send their money back home thus more money leaving the economy = bad.

This causes a decrease in the components of aggregate demand (I think that would count as Consumption? Because not as much money is being pumped back into the economy) which causes the AD to move to the left, fall in GDP etc etc

I think that's right, haven't studied it for a while so it's probably a bit sketchy, good luck anyway
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