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LA Minimum Wage
The author of this report has been asked to assess the Los Angeles minimum wage case study. Indeed, it would seem that Los Angeles is trying to raise their minimum wage to a shade above fifteen dollars an hour. They are basically trying to follow in the footsteps of Seattle, who just started doing precisely the same thing. However, Los Angeles is very different from Seattle in terms of its geography and its neighbors. As such, Los Angeles businesses have options that Seattle ones do not. While Los Angeles may think they are doing the economically sound thing, they should really rethink what they are doing, and for more than one reason.
If there is one term in the Mankiw text that leaps out at the author of this report, it would be the term equilibrium (Mankiw, 2004). This term takes on several varied and differing forms when analyzing the case (Mankiw, 2004). First of all, there is most certainly an equilibrium minimum wage in the Los Angeles area (Mankiw, 2004). It could very well be too low right now but there is a very good chance that raising the minimum wage up to more...
Again, this would manifest in a number of ways (Mankiw, 2004). First of all, it would shift the supply/demand curve balance in the Los Angeles area (Mankiw, 2004). The supply of people willing to pay the wages would be sky-high but the amount of positions that would be available that pay that wage would be, at best, as much as it is now (Mankiw, 2004). In all likelihood, the number of positions would go down as businesses would hire less, more some or all of their business out of Los Angeles (e.g. To Irvine or Englewood) or both (Mankiw, 2004).
Further, even if the shift in the minimum wage is actually perfect for the Los Angeles area, the fact that the other cities in close or direct proximity to Los Angeles will not be doing the same or similar things is going to nip Los Angeles in the proverbial bud. Indeed, many businesses will just shift a few blocks so that they can be in the same general area but they are not subject to the same laws that the Los Angeles businesses are. Things would be much different if the minimum wage went…
References
California,. (2015). History of California Minimum Wage. Dir.ca.gov. Retrieved 15 May
2015, from http://www.dir.ca.gov/iwc/minimumwagehistory.htm
Mankiw, N. (2004). Essentials of economics. Mason, Ohio: Thomson/South-Western.
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