Analysis

In 2019, state of New York increased minimum wage from 11.10 to 12.50 per hour, aiming to increase disposable income for low-income workers.

Evaluation

Short Run

• Job losses, particularly among small businesses or those with thin profit margins.
• Increased disposable income can boost consumer spending.

Long Run

• Some businesses can adapt, while others may go bankrupt (small resturants).
• Encourage automation, which is cheaper than hiring. (Kiosks in Mcdonalds.)

Assumptions

• Businesses can all absorb increased labor costs without significantly reducing employment or increasing prices. This may not hold true for all businesses, especially those with thin profit margins.