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    Econ Ia

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    rockarmy
    The document is an economic commentary analyzing Jamaica's decision to increase its minimum wage by 10% to $46 per week. Some key points: 1) The minimum wage increase is intended to stimulate the economy and help poor families as Jamaicans complain that salaries are not keeping up with rising prices. 2) In economic diagrams, the commentary illustrates how increasing the minimum wage would decrease the quantity of labor demanded and increase the quantity of labor supplied, potentially leading to unemployment. 3) While the increase may help standard of living, the government failed to consider workers who may lose jobs, with unskilled laborers most affected.

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    Econ Ia

    Uploaded by

    rockarmy
    3K views4 pages
    The document is an economic commentary analyzing Jamaica's decision to increase its minimum wage by 10% to $46 per week. Some key points: 1) The minimum wage increase is intended to stimulate the economy and help poor families as Jamaicans complain that salaries are not keeping up with rising prices. 2) In economic diagrams, the commentary illustrates how increasing the minimum wage would decrease the quantity of labor demanded and increase the quantity of labor supplied, potentially leading to unemployment. 3) While the increase may help standard of living, the government failed to consider workers who may lose jobs, with unskilled laborers most affected.

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    ECON IA

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    The document is an economic commentary analyzing Jamaica's decision to increase its minimum wage by 10% to $46 per week. Some key points: 1) The minimum wage increase is intended to stimulate the economy and help poor families as Jamaicans complain that salaries are not keeping up with rising prices. 2) In economic diagrams, the commentary illustrates how increasing the minimum wage would decrease the quantity of labor demanded and increase the quantity of labor supplied, potentially leading to unemployment. 3) While the increase may help standard of living, the government failed to consider workers who may lose jobs, with unskilled laborers most affected.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    3K views4 pages

    Econ Ia

    Uploaded by

    rockarmy
    The document is an economic commentary analyzing Jamaica's decision to increase its minimum wage by 10% to $46 per week. Some key points: 1) The minimum wage increase is intended to stimulate the economy and help poor families as Jamaicans complain that salaries are not keeping up with rising prices. 2) In economic diagrams, the commentary illustrates how increasing the minimum wage would decrease the quantity of labor demanded and increase the quantity of labor supplied, potentially leading to unemployment. 3) While the increase may help standard of living, the government failed to consider workers who may lose jobs, with unskilled laborers most affected.

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    COMMENTARY NUMBER 1 COVERSHEET

    Economic commentary number: HL Number 1

    Title of extract: Jamaica workers to get minimum wage increase

    Source of extract: Forbes

    Date of extract: 2 May 2009

    Word Count: 741

    Date the commentary was written: 17 May 2009

    Section of the syllabus to which the commentary relates: Section 2

    Candidate name: Rock Chetchotisak

    Candidate number No Exam


    Rock Chetchotisak
    No Exam

    Commentary Number 1 Extract

    Jamaican workers to get minimum wage increase


    Associated Press,
    03:32 PM EDT, May 02, 2009  

    Jamaica is hiking the minimum wage by 10 percent to stimulate the economy and help poor
    families.
    Workers will earn at least $46 a week starting Monday.
    Labor Minister Pearnel Charles said Friday the government wants to raise Jamaicans' standard of
    living, but without hurting employers.
    Jamaicans complain that salaries are not keeping pace with rising prices. The nation last
    increased minimum wages in January, by nearly 17 percent.
    About 1.3 million of the island's 2.8 million residents are employed, most of them in the services
    industry. Unemployment is about 10 percent.

    “Jamaican  workers  to  get  minimum  wage  increase.”  Forbes.  2  May  2009.  17  May  2009  
    <http://www.forbes.com/feeds/ap/2009/05/02/ap6370038.html>.  
    Rock Chetchotisak
    No Exam

    Commentary Number 1

    Jamaica is raising its minimum wage (a law that makes trading labor below a specified wage
    illegal) by 10% to $46 a week starting Monday from May 2. Assuming that the new minimum
    wage is set above the equilibrium price (price at which quantity demanded equals quantity
    supplied) for effectiveness, it is expected that there will be a surplus (excess quantity supplied at
    a particular price; the difference between the quantity supplied and the quantity demanded at a
    particular price) of labor. This is shown in Diagram 1 below.

    Diagram: Minimum Wage Laws in Jamaica

    W Surplus S
    Wmin
    2  
    Wmin
    1  
    Wage W  e  

    0 Qd2 Qd1 Qe Qs1 Qs2 Q

    Jamaican Workers (hrs/wk)

    In the diagram above, curve S represents the supply (the amount of labor households willing to
    offer at various possible wages during a given time period) of labor in Jamaica and curve D
    represents the demand (the amount of labor that a producer is willing and able to employ at
    various possible wages in a given time period). The equilibrium wage (the wage at which the
    quantity demanded of labor is equal to the quantity supplied of labor) is represented by We, and
    Qe is the equilibrium quantity bought and sold at the equilibrium wage. Wmin1 represents the
    previous minimum wage with quantity demanded (the amount of labor that a producer is willing
    and is able to hire at each particular wage during a given time period) at Qd1 and quantity
    supplied (the amount of labor households willing to offer at a particular wage during a given
    time period) at Qs1.

    All definitions have been adapted from:


    Sloman, John. Economics, 5th edition. Essex: Pearson Education Limited, 2006
    After the minimum wage is raised to $46 a week on Monday, May 4, the new minimum wage
    would be represented by Wmin2. It is expected that at this new minimum wage, there will be a
    decrease in the quantity demanded from Qd1 to Qd2 and an increase in the quantity supplied
    from Qs1 to Qs2 in response to the increased price of labor. Therefore, the initial surplus of
    labor (the quantity supply of labor exceeds the quantity demanded of labor) will increase.

    According to the article, the government wanted to raise Jamaicans' standard of living, but
    without hurting employers. By raising the minimum wage, the government failed to take into
    account the workers who may lose their jobs as a result of the increase in minimum wage. There
    is an inequality burdens of unemployment, the cost of unemployment would most likely be
    distributed to the unskilled labors, usually the minority teenagers with disadvantaged
    background. This is because if the government forces firms to pay higher wages for their labors,
    more skilled workers will be applied for the available positions. This is due to the fact that given
    the choice between hiring an unskilled worker and one with more experiences with a similar
    wage; employers with no doubt will hire the more productive employee as opposed to those with
    lower skills. The new minimum wage will have a negative effect on the young unskilled
    workers as employers will replace many of them who work for the minimum wage today with
    more skilled workers.

    However, on the positive side, it is true that the minimum wage law may improve the living
    standards of the Jamaicans workers who remain employed. This is because according to the
    article, prices are rising in Jamaicans. Therefore, such increase in wages would benefit those
    workers who were paid below the new minimum wage (Wmin2) and still retain their jobs after
    the law is imposed.
    Moreover, despite the potential replacements of workers, it is most likely that in the short-run,
    the affected firms would still face an increase in cost of production, labor. In this case, there will
    be a decrease in supply (amount of a good or service that producers are willing to offer at various
    possible prices during a given time period) of the firms’ products. Consequently, if the demand
    (the amount of a good or service consumers are willing and able to buy at various possible prices
    during a given time period) of the goods and services remains constant, it will ultimately lead to
    an increase in price of the products, thus decreases the quantity demanded. However, assuming
    that the additional wages that will be paid by firms will acquire more productive workers, in the
    long-run, the particular firms might be, and is most likely to be more efficient.

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