Which policy would most likely raise wage costs for a business?

Which policy would most likely raise wage costs for a business?

• A. The government requires more renewable energy
• B. The government raises the minimum wage
• C. The government reduces corporate tax
• D. The government implements recycling legislation

Answer: (B)

A policy that directly sets a higher pay floor increases wage costs because firms must pay at least that higher amount to their workers. When the minimum wage rises, the wage bill for each employee tends to go up, especially for those earning near the floor, which raises overall wage costs for the business. Other policies affect costs in different ways: requiring more renewable energy mainly changes capital or operating costs, not the wages paid; recycling legislation adds compliance or process costs; and a corporate tax cut lowers taxes rather than increasing how much firms must pay workers. So the direct impact on labor costs comes from raising the minimum wage.

A policy that directly sets a higher pay floor increases wage costs because firms must pay at least that higher amount to their workers. When the minimum wage rises, the wage bill for each employee tends to go up, especially for those earning near the floor, which raises overall wage costs for the business. Other policies affect costs in different ways: requiring more renewable energy mainly changes capital or operating costs, not the wages paid; recycling legislation adds compliance or process costs; and a corporate tax cut lowers taxes rather than increasing how much firms must pay workers. So the direct impact on labor costs comes from raising the minimum wage.