Suppose that the new administration hires you to research two alternatives for hourly pay. The first...

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Suppose that the new administration hires you to research two alternatives for hourly pay. The first is a free market where supply and demand determine hourly pay. The second alternative is where a $16 per hour minimum wage is set for all jobs. Based on what you have learned in class and at least two scholarly articles on the topic that are no more than five years old, write a 3-4 page paper in APA format examining the advantages and disadvantages of both plans. Then select the one you think is the better alternative and explain why.

David · Accepted Answer

Free Market Alternative: 
The Classical economist state that the wages i.e., price of a labor is determined by demand and 
supply.  They call it as market theory of the wage determination.  As and when the workers sell 
labor services, prices charged by them is influenced by the various factors from the demand side 
and various factors from supply side. Number of workers needed is the Demand and number of 
workers that are available is the Supply.  
 Law of demand: higher wages means higher price in labor market which leads to decrease in 
quantity of the labor demanded by the employers whereas lower wages means increase in 
quantity of the labor demanded. 
Law of supply:  higher price for the labor means high quantity of the labor supplied and lower 
price means lower quantity of labor supplied. 
The interplay among the factors decide the wages which includes number of the jobs, no. of 
workers, skills involved, and area of jobs which will lead help the employers and the workers to 
reach to a wage agreement. 
 If the employers are not able to find enough workers according to their needs then they will 
continue rising the wage offers unless more and more workers get attracted. And if the workers 
are in large quantity then the wages will reduce unless surplus workers decide to move elsewhere 
to find jobs. Equilibrium wage rate is established when the demand and supply meets. 
In advanced economy being free market almost all returns from the production goes to workers 
which are around 85%-90%. This is forced by the competition.  If the workers are provided with 
good equipments then they result to be more productive which ultimately leads to higher wage 
level. It is generalized for all workers. General wage levels are higher where there are high 
investments in equipments per worker. 
Advantages:  
1. Firms will be competitive an efficient. These markets keep the costs down for the firms. 
For example, the firms can get rid of the surplus workers. It helps in preventing firms going 
bankrupt and protects the jobs in long term.  
2. As there is increase in labor productivity, there can be increase in outputs and the exports. 
And so there will be less unemployment and less inflation. 
3. Some workers prefer employment patterns in free market as it suits their life style and 
they offer great range of choices.  
Disadvantages: 
1.

Suppose that the new administration hires you to research two alternatives for hourly pay. The first is a free market where supply and demand determine hourly pay. The second alternative is where a...

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