Consider a labor market in a fictional country where people lose their jobs due to a shock of innovation. What’s the best way to ensure these people get a decent living when they reenter the work force?
Technologies or other factors can make job skills obsolete, leading to unemployment in large parts of the economy. Those workers who lose their jobs may eventually end up doing non-skilled, low wage jobs. To give low wage workers a chance at a decent living, setting a minimum wage is one solution, but that could put others out of work. Scrapping the minimum wage and letting the market set labor costs risks creating a two-tiered society of rich and poor. An alternative would be to keep the minimum wage and do away with required social security contributions by companies. Yet another alternative is to fund training to help workers become more skilled. But what is best? Economists don’t agree. Many things affect the health of the labor market and societal attitudes make a difference.