GENERAL KNOWLEDGE

Detailed explanation-1: -In a competitive labor market model, a minimum wage set above equilibrium causes a decrease in firms’ labor demand and displaces some workers from their jobs, thereby generating unemployment.

Detailed explanation-2: -Compelling evidence from many countries indicates that higher minimum wage levels lead to fewer jobs. Studies that focus on the least-skilled workers find the strongest evidence that minimum wages reduce jobs. Low-paying jobs requiring low skills are the jobs most likely to decline with increased minimum wages.

Detailed explanation-3: -Minimum wages have been defined as the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract.

Detailed explanation-4: -Increased labor costs can create cost-push inflation such as when mandatory wage increases for production employees due to an increase in the minimum wage per worker. A worker strike due to stalled contract negotiations might also lead to a decline in production; and as a result, lead to higher prices.