True or False?
The statement is false. An increase in the minimum wage in the economy raises the wage that firms employing low-wage workers must pay for the services of labour. Firms will not employ labour that has a value marginal product less than the wage being paid---to do so would reduce their profit because the contribution of the worker to revenue will be less than the contribution to costs. This means that the poorest people in the country---those with the least skills---will be made unemployable by forcing firms to pay them more than they are worth. Denying people employment makes them worse off. A better policy would be to give poor people income subsidies and let them seek employment at whatever wage they can obtain in the market.