How can the inefficiency of the minimum wage law can be viewed as a conflict between social and private interest?
▷ Market disequilibrium
In order to tackle this question, It would be better for You to figure out the one of Market disequilibrium examples ‘The Minimum wage law’
According to The welfare economics lecture of my university, Market disequilibrium can be defined as ‘Prices and quantities do not continuously adjust to each other so that some sort of disequilibrium exists at each moment. Some disequilibrium can be occurred by Government. The Minimum wage law is one of them.’
▷ The Minimum wage law
Minimum wage law is the lowest remuneration that employers can legally pay their workers. Economically speaking, People call this figure as a ‘Price floor’
When it comes to the ‘DWL’ area, It means ‘Dead weight loss’ which shows The amount of loss by rising the wage. The employers stops hiring at (Q1,W1) point so Up to (Q2,W1)point, The Unemployment exists there. The workers who want to work less than W1 wage will be in trouble because No longer the workers can work at the price when they usually did after the minimum wage has worked on.
▷ The minimum wage law which viewed as a conflict between social and private interest
You can also see a conflict between social and private interest from this graph. Fundamentally this graph suggests The relationship between Employers and Employees when the government changes the limitation of wages.
You can apply this concept to the social and private interest views. For Equity sake, Governments want to improve the lower workers wellbeing by guaranteing their wages get higher. On the other hand For Efficiency sake, A market should not’t be controlled by External factors such as Government policies Otherwise, As the graph shows The External factors make a DWL area. So The process of making a country’s economy grow, There are 2 conflictive views, Efficiency which is related to the social interest, Equity which is related to the private interests.
In short, The Social interest can be considered as an Equity of workers wellbeing at the all walks of life. However The Private interests can be considered as an Efficiency when The optimal point between the Demand and supply curves on the labour market without intervention of External factors.
▷ Reference
Wikipedia
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