CUHK Economics Project Exhibition 2020

A1: When you want to analyze policy impact on specific variable, you should firstly notice that there might not be causal relationship between the policy impact and the targeted variable. In this case, there are many factors could have impact on low-income working households. For example, if government welfare expenditure on helping the working poor increased, the number of low-income working households would decrease. So that, you should include many related factors in the model to analyze accurately what is the effect of minimum wage policy on lowering the number of low-income working households.

A2:

The public concerns include two aspects: Unemployment and Inflation.

Unemployment is brought by firms laying off workers due to higher production cost from the minimum wage adjustment. Workers may lose their job due to minimum wage and therefore reduce their income. So that, minimum wage policy is harmful to workers ultimately.

Inflation is brought by firms increasing the prices of goods because of higher labor cost. Minimum wage policy pushes up price level, the living quality of workers would not be improved by the policy.

A3:

The regression result shows that each percentage increase in minimum wage will lead to 0.1208% decrease in the number of low-income working households. Applying this relationship, a [(33-30)/30] x 100% = 10% increase in minimum wage can theoretically reduce 1.208% of low-income working households.