Veronica Gomez-Quintero

Micro Economics 2010

December 10, 2015
Article Review Project

Introduction:
The article I will be discussing is an article dated September 21, 2015 from CNN money
titled Unemployment keeps going down so why aren't wages going up? By Heather Long. I will
be discussing topics ranging from unemployment, minimum wage for employees and expenses
such as healthcare costs, rent, groceries and gas. These various items or topics play an important
role in our economy. Although, we may not stop to pay a great deal of attention to each of these
issues they are studied in microeconomics.

Article Summary
The article discusses the decreasing unemployment rate in the United States and the fact
that the minimum wage and average wages have not increased. The article starts off by stating
"Americans want higher wages". Many economists and the Federal Reserve have said Don't
worry! Wage increases are coming along with a better economy. Janet Yellen America's top
economic policy maker indicates that she believes that the economy will continue to perform
well. Many Americans may not find that information comforting. Many economic growth relies
on the Phillips Curve which basically indicates that more jobs equal better wages and higher
inflation. In simple terms, the Phillips curve states that as unemployment rate is low there are
fewer individuals actively seeking employment. Thus leading to employers paying higher wages

in order to maintain their current staff or they must hire additional employees. The
unemployment rate at its peak was 10% in October 2010. Currently the unemployment rate is
5.1%. The unemployment rate fell to 5.5% in February 2015 and many experts speculated or
believed that wages would increase within a short period of time. They haven't.
"Economic models don't work in a vacuum like these guys at the said assume" Michael
block says. Michael block is a chief strategist at Rino Trading. Many workers have found a job
with better pay by actually changing jobs all together. Inflation is low. Prices for the most part
have remained the same with just a small increase of 0.2% in the past year. Most wage increases
are consumed by larger gas, groceries and rental expenses. Economist Yardeni states "I challenge
the notion that it is a good thing to have inflation going up. A lot of inflation is rent inflation.
Why is that good for consumers?" Americans continue to wait for better wages.

Interpretation
The article discusses the request for an increase in the minimum wage for all American
employees. A minimum wage is set by a price floor. The wage is set that is the minimum that
employers can pay their employees per hour. A national law establishing a minimum wage or
price floor was established in 1938. Many employees are unaware of the issues that come along
with having a minimum wage and as well as raising a minimum wage. For example, many
employees are requesting that minimum wages be increased to $15 per hour from the $7.25
minimum wage in Utah. In Utah, this doubles the minimum wage. According to the Bureau of
Labor Statistics and www.raisetheminimumwage.com, in December 2015 the unemployment
rate was 3.6% in the state of Utah. Washington has a minimum wage of $9.47 and an
unemployment rate of 5.2%. As you can see, in states with higher minimum wage tend to have

higher unemployment rates. Employees requesting an increase in the minimum wage may not
understand that as a result of an increased minimum wage, the employee may not have a job to
earn that minimum wage at.
The article makes a point of stating that due to the low inflation rate, the minimum wage
of workers and any small increases they may have been able to acquire is consumed by the cost
of rent, gas and groceries. Rent control or a price ceiling actually creates a wide range of issues.
These issues range from limited rental units and or poor rental conditions. The low inflation rate
and rental rates is a perfect example of how the market self adjusts to accommodate for
appropriate pricing. Rental control creates a shortage of rental apartments as well. A price floor
has the opposite effect and creates a surplus.
In economics, we assume that people act in their own self-interest. It is known as the self
interest principle. In this case, I am a bit conflicted on whether or not these individuals are acting
in their own self interest. Of course, it is their belief that they are acting in their own self interest.
However, the impact that an increase in the minimum wage will have may not be in their best
interest.
The article also discusses a few goods such as gas, groceries and healthcare costs. These
items may fit into different categories such as elastic or inelastic, inferior good or a luxury good.
I want to take a moment to point out that many individuals are living off a very small wage, in
Utah the minimum wage is $7.25. Although individuals are living off of a very small wage, they
continue to purchase these goods. Although their resources are limited, they continue to purchase
these goods. Groceries on the other hand contain items that are both elastic and inelastic. For
example, diamonds would be considered inelastic. Diamonds are typically bought infrequently
and are known as very luxurious items. There ae quite a few substitutes such as other precious

gems like cubic zirconia. A change in the price of the diamond would result in a very small
change in demand from the consumer.
Certain grocery items can be either elastic and inelastic. In some cases, people may also
resort to an inferior good due to limited income. When income rises, they may turn away from
inferior goods such as a loaf of Wal-Mart brand bread and opt for a loaf of an organic bread. In
fact, Wal-Mart is also associated with being an inferior good. When the income of consumers
rises, consumers switch to different stores for their purchasing needs.
Additionally, there arent many substitute goods for gas which make this item inelastic.
Consumers continue to purchase gas despite a price increase. Consumers may switch to electric
cars. However, electricity is also inelastic. Consumers demand would change very little if there
are large increases in price.

Applications and conclusion

Currently, I am a compliance officer with the State of Utah Labor Commission. The
Labor Commission has undertaken a project that we have named Success. The goal of this
project is to require all state agencies to increase employee production by a minimum of 25%.
This increase in production moves along the production possibilities curve to a highly efficient
point. This isnt to say that our agency was at a point inside the production possibilities curve.
During the implementation of this project there was no increase in the number of Labor
Commission workers or cost of the current workers. Employees are required to produce at a
higher percentage and with a few changes we have been able to meet and exceed our goal. These
changes included things such as the specialization of certain tasks or duties. Employees with a
comparative advantage in certain tasks are limited to completing these tasks.

By doing this, the Labor Commission was able to increase production by 33% in just a
couple months. This is a great example in the benefits of performing tasks that each employee
has a comparative advantage in. Some employees can process a higher number of cases at a
lesser opportunity cost. These employees are specialized. Other employees can process a higher
percentage of Internal Quality Assurance cases. This is called specialization and trade. Each set
of employees trades the tasks they are not specialized in to the employee with specialization in
that task.
The number of employees in the agency has remained the same since1985 or so.
However, this may soon change. Unfortunately, diminished marginal product may affect the
amount of production increased by the addition of the fourth employee. Employees will be faced
with limited copiers, scanners and printers, items of that nature. That means that the addition of
the fourth employee may not result in the desired increase in production as the second or third
employee may have had.
The agency that I work with regulates employers. Employers must be compliant with
certain laws such as the Worker's Compensation act. In a perfect competition market there aren't
any barriers to entry. Many new employers may enter the market and produce an identical item
or product. The state of Utah has approximately 200,000 small businesses. This perfect market
competition allows many businesses along with small businesses to freely operate and compete
in the market.
The state of Wyoming is monopolistic state. When it comes to Worker's Compensation
coverage, employers in the state of Wyoming must purchase their Worker's Compensation policy
through their Wyoming state fund. Employers have very little say or choice when it comes to the
price that is set for their workers compensation insurance rate, as there are no other options. The

state of Utah licenses many private insurance carriers to write Worker's Compensation policies.
Companies such as State Farm, Travelers Insurance, and the Workers Compensation Fund of
Utah can write workers compensation policies for Utah employers. Carriers have the right to
produce or write identical policies and employers have the freedom to shop for a different
insurance carriers and different insurance rates. Insurance carriers must adjust their insurance
rate or premium accordingly in order to compete with other insurance carriers writing the same
policies. This is known as perfect competition. Many new employers can enter the market.
In conclusion, the study of microeconomics dives into more detail of the opportunity
cost, the self interest principle, elasticity or inelasticity. Understanding these key principles
allows us to operate with additional knowledge in each of these areas. For example, supply and
demand is a huge part of business. Understanding the concepts is vital to a companys production
and profitability. Understanding the impact of the minimum wage and rent control is very
important to each and everyone of us.

Works Cited
Long, Heather. "Unemployment Keeps Going Down. So Why Aren't Wages Going Up?"
CNNMoney. Cable News Network, 21 Sept. 2015. Web. 13 Dec. 2015.
http://money.cnn.com/2015/09/21/news/economy/wages-still-not-growing-much-federalreserve/
"Unemployment Rates for States." U.S. Bureau of Labor Statistics. U.S. Bureau of Labor
Statistics, 20 Nov. 2015. Web. 13 Dec. 2015.
http://www.bls.gov/web/laus/laumstrk.htm
"Whats the Minimum Wage in Your State?" Whats the Minimum Wage in Your State? Raise
The Minimum Wage, n.d. Web. 13 Dec. 2015.
http://www.raisetheminimumwage.com/pages/minimum-wage-state