Economist: If minimum wage levels are low, employers have a greater incentive to hire more workers than to buy produc...

shunhe on October 6, 2020

Hi @jingjingxiao11111@gmail.com,

Thanks for the question! Let’s take a look at what the stimulus tells us. We’re told here that if minimum wage levels are low, then employers have a greater incentive to hire more workers than to buy productivity-enhancing new tech. So the less the employers have to pay employees, the more likely they are to get them over buying capital instead. So productivity growth, which is necessary for higher average living standards, falls off. But high minimum wage levels results in higher productivity. So raising the minimum wage levels, the argument concludes, will improve the country’s overall economic health more than hiring cutbacks triggered by the raise would harm it.

So now we’re asked for something that’ll strengthen the economist’s argument. Remember, the conclusion is that raising the minimum wage level would improve the country’s overall economic health more than hiring cutbacks would hurt it. So we want to make that seem more likely.

Now take a look at (A), which tells us that productivity growth in a country usually leads to an eventual increase in job creation. Well, if that’s true, and we know we’re getting productivity growth, then we also know we’re going to get an eventual increase in job creation. And if that’s the case, then it seems more likely that the hiring cutback harm will be smaller, which strengthens the conclusion! So (A) strengthens, and is the correct answer here.

Hope this helps! Feel free to ask any other questions that you might have.