This summer, I got a job working in a hot and sweaty BBQ food truck for $15 an hour. This shocked me because I had gotten paid from $9.50 to $11 an hour in my previous jobs, so $15 an hour was huge in my eyes and made my friends jealous. After taking this economics course, I can now look back at $15 an hour using the concept of price signaling to see that price is a signal wrapped up in an incentive, one of the most fundamental insights in economics. (Cowen, 2020). Getting the job was the easiest thing ever. This was because the manager had fired all but one of her employees due to an unsatisfactory work ethic. The manager was in desperate need of more employees, so she increased the wage from $12 to $15 an hour. This move incentivized a couple of other college students and me to work for her. This increase in wages attracted many employees, whereas before, no one wanted to work there at $12 an hour. Her incentive worked so well that she became overstaffed and fired several people. Currently, America is in a labor shortage, and the same concept is at play; businesses are increasing wages to incentivize workers. But will this incentive be enough, or will further negotiation have to be made to get people to work again? Either business will close, or wages and prices will steadily increase.
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