Mr. Wheelan's Skype Session

Charles Wheelan discussed the topic of an increase in minimum wages to improve standards for the 14% of people in poverty. He made a statement about the wages being equal to the marginal product of labor. The more value people add with their work, the more they get paid. I believe this was the strong point in his proposal because it sort of guarantees that the business firms, or companies won't be losing money over inefficient workers. However this idea can be refuted with the efficiency-wage theory. This is the idea that it may benefit firms to pay workers a wage higher than their marginal product. This argument is strong because it can lead the workers to remain loyal to the company. With a higher wage, people might also be afraid to be laid off, so they will work harder to make sure they keep their job. Even though Mr.Wheelan's idea is great to reassure a safe way to run a business, it is essential for the company to take actions such as the efficiency wage theory in order to grow or simply help itself during a recession or inflation.