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Labor Policy

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People of many different age groups and circumstances take advantage of part-time employment opportunities provided by the fast food industry. Given the wide variety of different fast-food vendors, the industry is fiercely competitive, as is the unskilled labor market. In each of the following circumstances, indicate whether the proposed changes in government policy are likely to have an increasing, a decreasing or an uncertain effects on employment in this industry.

A. Elimination of minimum wage law coverage for those working less than 20 hours per week
B. An increase in spending for education that raises basic worker skills.
C. An increase in the employer portion of federally-mandated FICA insurance costs.
D. A requirement that employers install expensive new worker-safety equipment
E. A state requirement that employers pay 8 percent of wages to fund a new national healthcare program.

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A: This will increase the demand of labor thereby increasing the equilibrium wage rate. However, because the minimum wage floor is removed, the actual wage rate will probably be less than the earlier wage rate.

B: Increasing basic worker skills will reduce ...

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