You are encouraged to use our textbook and the online book for this class, which is called Popular Economyths. A good, well-reasoned, detailed answer should be at least 2 to 2.5 pages in length.
– The Minimum Wage
Since 2009, the national minimum wage has been $7.25 per hour for most occupations in the private sector. Many of those who support an increase in the minimum wage believe this is one way the government could possibly reduce poverty, while its opponents believe that it creates unemployment and hurts low-skilled workers. The following items address the idea of raising the minimum wage from the current federal minimum of $7.25 per hour.
1) Minimum wage is a price floor, so discuss the effect of a minimum wage law from a supply and demand standpoint, making sure to address the concept of surplus or shortage with respect to the quantity of labor supplied and the quantity of labor demanded that is generated by this price floor.
2) What will be the impact on the prices of the products produced by workers working at or near the minimum wage level, and how will this affect overall consumer purchasing?
3) Discuss any potential changes in the incentives for low-skilled workers to increase their human capital, and for employers to substitute capital inputs (technology and automation) for labor.
4) What might be an unintended impact on government spending on entitlements such as welfare, food stamps, and unemployment compensation in light of the fact that changes in the minimum wage can create changes in unemployment and underemployment?
5) Do advocates of a minimum wage law believe that workers should be paid based on their output (i.e., performance) or on their level of need?
6) Advocates of a minimum wage often believe that employers would “exploit” or “take advantage” of their workers if there were no minimum wage. How would you know if employers are “taking advantage” of their workers if there were no minimum wage? What could the employee do if they believed they were being exploited?
7) Compare and contrast some of the information contained in the two videos:
Which do you agree with more from an economic perspective and why? Be specific!
8) Based on your responses, do you believe that the minimum wage should be raised, lowered, remain as it currently is, or be altogether eliminated? If you think there should be a minimum wage, how would you arrive at the specific wage?