Suppose a government increases the minimum wage. Which is the most reasonable prediction from a positive analysis perspective?

• A. The minimum wage should not be increased.
• B. Raising the minimum wage is morally justified.
• C. Employment among low-wage workers may decrease due to higher labor costs.
• D. All workers will benefit equally from the policy.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the nature of positive analysis in economics. Positive analysis focuses on objective, testable statements about how the world works, without making value judgments or moral considerations.
2. Step 2: Identify the economic mechanism behind a minimum wage increase. When the government raises the minimum wage, it sets a legal floor on wages, which can increase labor costs for employers.
3. Step 3: Analyze the potential impact on employment. Higher labor costs may lead employers to reduce the number of low-wage workers they hire, potentially causing a decrease in employment among this group.
4. Step 4: Evaluate the given statements from a positive analysis perspective. Statements about moral justification or normative claims (what should be) are not part of positive analysis, while predictions about employment effects are.
5. Step 5: Conclude that the most reasonable positive analysis prediction is that employment among low-wage workers may decrease due to higher labor costs, as this is an objective, testable outcome.