Eco302 GDB Solution by Munir
The government's decision to increase the minimum wage from Rs 25,000 to Rs 32,000 will have both positive and negative impacts on producers and workers. Let's discuss these impacts separately:
1. Impact on Producers:
a. Increased labor costs: The higher minimum wage will directly increase labor costs for producers. This can be a significant burden, especially for small and medium-sized businesses that operate on tight profit margins. Producers will need to allocate a larger portion of their budget to pay their workers, which could reduce their profitability.
b. Reduced profit margins: With higher labor costs, producers may face reduced profit margins unless they can pass on the increased costs to consumers through higher prices. However, increasing prices might lead to lower demand for their products or services, impacting overall sales.
c. Increased productivity or automation: To mitigate the impact of increased labor costs, producers may invest in productivity improvements or automation. They might seek ways to streamline processes or adopt technologies that can reduce the need for human labor. This could lead to job losses or a shift in the required skill set for workers.
