#10 - Columnist: Raising the minimum wage to the level recently proposed will

[Administrator]

Complete Question Explanation

Assumption. The correct answer choice is (C).

Answer choice (A):

Answer choice (B):

Answer choice (C): This is the correct answer choice.

Answer choice (D):

Answer choice (E):

[lsatowl]

Hi! I narrowed the answer choices to B and C, but chose B incorrectly. Can someone please help explain why B is wrong and C is correct?

[Amber Thomas]

Hi Isatowl!

Let's start by breaking down our stimulus.

Premise: An increase in minimum wage will cause businesses to increase prices of goods and services, which low-income workers can already barely afford
Conclusion: Raising the minimum wage to the proposed level will actually hurt low income workers instead of helping them

Something is missing from the stimulus that would allow us to logically make this conclusion based on the premises we are presented. Just because a raise in minimum wage (MW) will cause an increase in the prices of goods and services (GS), that doesn't necessarily mean that the relative cost will increase.

Imagine the following:

Currently, MW = $5 currently, and the average price of GS = $4
The proposed MW = $10. We have no idea what the consequent increase in the prices of GS would be. If the cost of GS raises proportionally to MW, increasing to $8, this doesn't harm low income workers, because the ratio of MW:GS remains the same, and they retain the same level of buying power. The cost of GS could also potentially raise less than proportionally to MW, to something like $6, which would be beneficial to low income workers. Finally, it could raise more than proportionally to MW, to something like $10, which would actually be harmful low-income workers. The point is, we don't know how much GS increases when MW is increased, so to pre phrase our answer, we can say something like: "If MW increases, GS will increase to a higher relative cost."

Now, let's look at our answer choices:

C) The proposed minimum-wage increase would not wholly compensate low-income workers for the resulting increase in prices for goods and services

This is exactly what we are looking for! This answer choice tells us that the raise in prices of GS will outweigh the increase in MW, resulting in less buying power for low-income consumers, thus harming them.

B) Any increase to the minimum wage smaller than the one proposed would not substantially affect the prices of goods and services

The stimulus explicitly states that when MW increases, the cost of GS will also increase-- we can assume this is true of any MW increase, not just the one currently proposed. It would logically follow that even a smaller increase in MW would also be harmful to low-income workers. This does not help us make our conclusion.

I hope this helps!