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    Why would changes in minimum wage affect higher paid employees?

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    Why would changes in minimum wage affect higher paid employees as well.

    What are some of the methods that employers can use to control labor costs and do the methods result in positive or negative results.

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    Dear Student,

    The changes in minimum wage would certainly affect the higher paid employees as well. We call this effect as "ripple" or "spillover" effect. Employers often raise the wages of these better-paid workers in order to maintain pay differentials with minimum wage workers in their firms. For example in a restaurant, if the attendant's wage is increased from $ 5 to $ 10 per hour, the salary of the accountant in the same restaurant cannot remain at say $ 8 per hour or even the cook's wage at say $ 12 per hour, because it will affect the whole employee structure of the restaurant. So if the attendant's salary is increased from $ ...

    Solution Summary

    The solution demonstates how change in wages of one group of employees could result in changes in other employee pay. A comprehensive example is followed through. Then, there are two methods explained to control labor costs.