a result, employers will be forced to increase their productprices, reduce their production, lay off their workers or close down (Mahboubi, 2017).
Ultimately, all of these options decreaseprofitability, and due to the self-interest motive, it is the employees whowill suffer. For example, Tim Hortons has recently increased the prices oftheir breakfast items and cut some of their employee benefits, in response tothe minimum wage hike (Sagan, 2018). Some Tim Hortons locations have even goneas far as eliminating paidbreaks, fully-covered health and dental plans (Sagan, 2018). While, Tim Hortons does argue that these are regularchanges, and are not related to the minimum wage increase, it is inevitablethat companies take measures to offset the cost increase. Similar to lower-wageindustries, youth employment will also be affected negatively, due to theminimum wage increase. The majority of employees working minimum wage jobs, areyoung, unskilled and are easily replaceable (Mahboubi, 2017). A recent studyshowed that a ten percent increase in the minimum wage creates a three to sixpercent decrease in youth employment (Lau, 2017). Employers are more likely to hireexperienced and skilled workers when paying higher wages, therefore it isunlikely, for a teenager to get employed.
Furthermore, companies are moreinclined to replace employees with specialized technology that will do the samejob more effectively. In the long term, this will reduce costs for the companyand ultimately be cheaper, but at the loss of many jobs. The minimum wage hikecontrasts the seven-year freeze Ontario experienced beginning in 2011 when theminimum wage was set at $10.25 (Waterloo Region Record, 2011). If this minimumwage hike had been distributed evenly over the seven years, instead of freezingwages, the impact might not be as drastic. In conclusion, such a large minimumwage raise implemented and put into effect too quickly could be difficult forbusinesses to handle, resulting in an increase in unemployment (Lau, 2017). When discussing bothfiscal and monetary policies, economists discover controversy as to howeffective these stabilization policies really are.
Stabilization policies aregovernment policies designed to lessen the effects of the business cycle(Lovewell, 2012). There are two types of stabilization policies, fiscal andmonetary, and of these, there are two types, expansionary and contractionary. Expansionary policies are the focus whendiscussing unemployment as the goal is to reduce unemployment. The expansionaryfiscal policy is