Which of the Following Explains Why Increasing the Minimum Wage

question 1

Multiple Choice

Which of the following explains why increasing the minimum wage may fail to reduce income inequality or the poverty rate?

• A) The Wessel's effect only applies to those workers with fringe benefits.
• B) Employers may expect increased effort from workers after a minimum wage increase.
• C) The majority of those affected by the minimum wage live in households with aggregate income far above the poverty line.
• D) The minimum wage causes an increase in the out of poverty escape rate.
• E) Earning the minimum wage cannot give the worker enough income to put him above the poverty line.

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Definitions:

Accounts Payable Turnover Ratio

A financial metric used to analyze how quickly a company pays off its suppliers by comparing net credit purchases to the average accounts payable during a period.

FICA

The Federal Insurance Contributions Act (FICA) is a U.S. law that mandates a payroll tax on both employees and employers to fund Social Security and Medicare programs.

Social Security

A government program that provides financial benefits to retirees, disabled workers, and their families.

Current Liability

A company's debts or obligations that are due within one year or within the normal operating cycle.