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Labor Economics: The Factors That Contribute To The Minimum Wage - Assignment Example

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The main objective of the assignment "Labor Economics: The Factors That Contribute To The Minimum Wage" is to investigate the relationship between the unemployment rate and the value of the minimum wage. Furthermore, the writer addresses the decline in the minimum wage…
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Labor Economics: The Factors That Contribute To The Minimum Wage
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Download file to see previous pages Discriminating firms usually have a higher cost of operation since they bear the cost of discrimination. Becker’s concept shows that minorities in such an environment usually work harder and are more productive hence would accept a lower wage. This means that the cost of production is lower hence the firms become more profitable. The discriminating firms, however, are at a higher cost as the majority of employees tend to demand relatively higher wages and their productivity is average. As a result, more employees would be required to achieve acceptable productivity.
The entry of a nondiscriminating firm under a constant return to scale means an increase in the number of employees is directly proportional to productivity. A nondiscriminating firm that has a high specialization of minorities would ideally have higher productivity per employees and therefore an increase in a number of more productive employees would mean a subsequence increase in productivity and thus more profitability. This is because the wage bill is also lower than that of a discriminating firm.
The entry of a nondiscriminating firm under the decreasing return of scale DRTS would lead to constant production and decreased overhead cost. Also since an increase in the workforce does not adequately increase the production. The cost of having more employees is drastically reduced and since the minority workers produce maximally the cost of the wage bill remains relatively low and hence the firm becomes more profitable. In such a firm it would lead to more efficiency as the production process require less manpower for efficiency and use of minority who are efficient and extremely productive would lead to the most desired state of profitability. ...Download file to see next pagesRead More
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