How do you feel about minimum wage as an economistintraining

How do you feel about minimum wage (as an economist-in-training)? Are the gains in Laborer-surplus worth the loss in market efficiency? Be aware of what the tradeoffs are? Be ready to speak intelligently about the role unions serve and about the costs they impose.

Solution

Yes, gains in labourer surplus is extremely high when minimum wage law is enacted.

But there are two situations when unions may lead ot undesirable effects:

a) If it leads to unemployment at a high level, the loss will be much more. There will be some workers who will enjoy a high wage and others will not get a job at all. It will rather increase in equality in the economy.

b) And many a times, unionized workers donot pay attention on productiivty as their jobs are secure. It leads to fall in overall productivity in the economy.