#24 - Economist: If minimum wage levels are low, employers

[Administrator]

Please post your questions below!

[jwheeler]

I was between A and C on this one, but ultimately chose wrong. Can you walk me through A and point out why C is incorrect?

[Brook Miscoski]

So, jwheeler, this was my approach:

Stimulus: Economist says higher productivity and better living standards comes from higher wages, so raising wages would be economically healthy.

My reaction: leaping from a few workers to overall health seems like a stretch. Also, there was an internal contradiction, since the economist said that a lower wage means more people get hired, so why wouldn't that be more important?

Question stem: asks me to strengthen the stimulus.

(A) This addresses the internal problem with the economist's reasoning by indicating that hiring would still continue to rise.
(C) This makes the internal problem worse by indicating that the lower hiring (unemployment) from higher wages will somewhat offset the higher living standards brought on by better productivity.

So both A and C hit on the central problem, it's just that C makes the problem worse, but your task is to improve the argument.

[Jbontemps]

Can I ask about the part that mentions “a greater incentive to hire more workers vs. buy new technology”...

Was this simply added to distract or could it have been used to also strengthen somehow?, by for example saying that with higher minimum wage levels, employers do NOT have a greater incentive to buy new technology vs. hire more workers, which in turn would NOT improve or would even harm the overall economic health? (Less workers hired)

I was concentrating on that aspect which is why I chose E... And my understanding of A is only that if minimum wages were to increase, resulting in higher productivity - an eventual increase in job creation would help slightly strengthen the conclusion that the OVERALL economic health would improve (however I don’t see how it most strengthens)

Although I was not completely convinced with E, my thought processs was that if new technology tends to quickly become outdated, then there would be less of an incentive to buy it vs. hire more workers...

[Malila Robinson]

Hi Jbontemps,
It certainly could have been used to strengthen the argument, even though it wasn't necessary in this particular question.

Answer A strengthens the argument by addressing a weakness in the argument. The argument states that if you have a low minimum wage then more workers will be hired. So while raising the minimum wage will have beneficial results it will also mean that some people would be out of job. Answer A solves that problem by creating more jobs for those workers who were displaced by the higher minimum wage.

For Answer E the argument is saying that they are not investing in the new technology, so while this may provide a reason for why they wouldn't invest in new technology it doesn't affect the main argument which is related to minimum wage.
Hope that helps!
-Malila

[cecilia]

Hi Powerscore peeps and Malila- Thanks for the explanation and I totally see why (A) is the correct answer. I just want to follow-up on Jbontemp's question on (E) as well, cuz I had the exact same reaction when I reluctantly initially picked it.

I think Jbontemp and I both had a similar idea in our heads of: okay, two options presented. option 1 and option 2. If we are told that option 1 has this one huge negative, that might strengthen the case for option 2.

And just to clarify, this idea is INCORRECT, right? Just because you have potentially issued a blow to one of two options presented, that does NOT strengthen the case for the second option. Is that right?

Thanks and hope I haven't confused anyone.

[Zach Foreman]

Cecilia, your analysis is right but you have just reversed the options. Lets look more closely.

Option 1: Keep current low minimum wage->hire more people but not invest in productivity tech->less productivity growth->less increase in living standards
Option 2: Raise minimum wage->invest in productivity tech but not hire more workers->more productivity growth->more increase in living standards (this is the path we want to strengthen!)

So, option one is generally worse but does increase employment and option 2 is better but does not increase employment. So, you can see how A addresses the discrepancy. But what does E do? Well, which option relies on productivity technology? Clearly option 2. So if this productivity tech isn't as good as it seems, that would *weaken* option 2 rather than strengthen it. So, E is an opposite answer.
So, yes, weakening option two does strengthen option one. But we don't want to do that here.

So, jbontemps is correct when he says " if new technology tends to quickly become outdated, then there would be less of an incentive to buy it vs. hire more workers..." And if hiring workers is better, then we would expect that keeping the minimum wage low would be better because it allows companies to hire more workers. But that is the opposite of the economist's arguments and thus would weaken the argument, not strengthen it.

[g_lawyered]

Hi P.S.
This question took me a while to answer because of writing out the conditionality in argument. So my analysis in completing this question is similar to Zach's explanation. However, I have several questions on whether my method in solving this question is correct or not. Here's how I diagrammed the conditional chain in the argument

Premise 1 & 2: Low min. wage employers hire more workers (don't buy tech) high average living standard less productivity growth
CP of Premise 1 &2: High productivity growth low average living standard employees DON'T hire more workers (buy tech instead) High (not low) min. wage

Premise 3: High min. wage High productivity growth

Concl- Raise low min. wage (high min wage) improves overall economic (more than hiring cutbacks). "triggered by the raise would harm it" I didn't understand what this meant. I just focused on the comparison part of the concl.

I couldn't really pre-phrase the assumption except that there was rogue term "overall economic health" in the conclusion.

Question 1: Can someone please confirm that this is accurate conditional chain or not?
Question 2: Can someone please explain what: " Thus, raising our currently low minimum wage levels would improve the country’s overall economic health more than any hiring cutbacks triggered by the raise would harm it." means? I didn't understand this convoluted part of the conclusion.

I had answer choice contenders (A) and (C). Even though my conditional chain didn't match either answer, I eliminated (C) because I didn't think "key factor" supported/was relevant to the argument. By process of elimination, I chose (A). But I'm unsure of why (A) is actually correct.

Question #3: In some way, I see "eventual increase in job creation" in (A) to contradict my contrapositive of Premise 1 & 2 that "employers won't hire workers". I'm stuck on this. Can someone please explain what about (A) strengthens the argument? ?
Please help

[Jeff Wren]

Hi G,

This reasoning in this argument is tricky (it technically mixes conditional and causal reasoning).

1. It looks like you got the first premise correct but not the second.

I'd diagram it:

MWL - > HMW and not BPENT

(if minimum wages are low, then employers will hire more workers and not buy productivity-enhancing new technology)

Note - I realize that technically the premise just mentions "employers have a greater incentive to," but for diagramming purposes, this gets at the general idea.

The second premise is tricky. Part of it states that productivity growth is necessary for higher average living standards.

This is a separate conditional statement that can be diagrammed:

HALS -> PG (in order to have higher average living standards, one must have productivity growth)

The contrapositive is

not PG -> not HALS (if you don't have productivity growth, then you won't have higher average living standards)

Now, the full second premise states that as a result (of the first premise) productivity growth falls off. For our purposes, this means that productivity growth stops, or that we don't get productivity growth (not PG).

So combining these premises would be:

MWL - > HMW and not BPENT -> not PG -> not HALS

Your third premise looks good.

I'd diagram it:

MWH -> PG (just to keep the "productivity growth" term consistent)

As for the conclusion, the idea is that since low minimum wages give an incentive to employers to hire more workers than buy new technology (since hiring workers is relatively cheaper), higher minimum wages would have the opposite result of giving employers an incentive to hire less workers going forward (since it now costs more to hire each worker) and instead invest in the new technologies, which are what causes the productivity growth.

Basically, the conclusion is saying/implying is that the productivity growth from the higher wages/technology will be better for the overall economy than any unemployment caused by the hiring cutbacks (the hiring cutbacks mean the fact that employers will hire fewer workers because each worker now costs more to hire since the minimum wages are now higher.)

In Answer A, the idea is that the productivity growth caused by higher minimum wages will ultimately create more new jobs (that may be completely unrelated to the old jobs) such as the development of new companies, new industries, etc.. What this suggests is that even though individual employers may have an incentive to hire fewer workers than than previously did, there could still be more overall jobs available in the long run because the economy itself has grown so there are more companies that are hiring, etc..