In a free market, consumers and sellers communicate by price to approach a equilibrium price. In the real world, government also plays a roll. Government often sets up a price floor or a price ceiling to prevent price from going above the equilibrium price or to increase people’s incentive of producing.
For example, government sets up minimum wage of income to increase incentives of workers, which is like a price floor from my perspective. A research reports that the minimum wage has increased in 18 states in 2018, which is good for workers. Why would government set up a minimum wage? From my perspective, a minimum wage is to protect workers from being taken advantages to those managers. Therefore even a poor people can at least earn enough money to live his life. The research says that “the institute estimates that the raises will impact 4.5 million workers,” also increase workers’ incentive to get a job. Therefore the GDP of US would grow higher. However, I don’t think this is a good new to the CEO of the company because as the price to hire employees grow higher, they might want to hire less workers.
Fed President Neel Kashkari says that there might be a wage growth. He talks about “everyone’s been declaring we are at maximum employment. More Americans have been coming in, which is a really good thing. This is one of the first signs that we seeing wage growth finally starting to pick up.”
There might be an affect as I thinking about the increasing of minimum wage. As more people want to get a job, the demand of job is higher than the job people could apply in the world. In this way, this situation leads to a shortage of jobs. How would government play a roll in this part? Government gives out subsidies. According to this article, most subsidies went to farmers of grains such as corn, wheat, and rice mostly because grains provide 80% of the world’s caloric needs. By giving out subsidies, government encourages farmers to produce more grains. At this point, government absolutely plays an important roll in real world economic. Not only to balance the market economic but also prevent market from crashing.
image source-https://www.brookings.edu/research/thirteen-facts-about-wage-growth/
21st Century Citizenship 