After you have studied Economics in the News on pp. 182-183,...

After you have studied Economics in the News on pp. $182-183,$ answer the following questions. a. When a state raises its minimum wage above the federal minimum, what would you expect to happen to unemployment in that state? Illustrate your answer with a graph. b. The news article reports that the percentage of hourly paid workers paid the minimum wage or less decreased from 13.4 percent in 1979 to 4.3 percent in $2013 .$ Would you expect the rise in the minimum wage to have a smaller effect on unemployment today than in 1979 ? c. The news article reports that during the recovery from the $2008-2009$ recession, wage rates grew slowly and the bottom wage rates grew slower than top wage rates, straining the budgets of low-paid workers. How would you expect this fact to have influenced the effect of the minimum wage on unemployment?

After you have studied Economics in the News on
pp. $182-183,$ answer the following questions.
a. When a state raises its minimum wage above the federal minimum, what would you expect to happen to unemployment in that state? Illustrate your answer with a graph.
b. The news article reports that the percentage of hourly paid workers paid the minimum wage or less decreased from 13.4 percent in 1979 to 4.3 percent in $2013 .$ Would you expect the rise in the minimum wage to have a smaller effect on unemployment today than in 1979 ?
c. The news article reports that during the recovery from the $2008-2009$ recession, wage rates grew slowly and the bottom wage rates grew slower than top wage rates, straining the budgets of low-paid workers. How would you expect this fact to have influenced the effect of the minimum wage on unemployment?

Key Concepts

Minimum Wage Policy

This concept refers to the legally mandated lowest hourly wage that employers can pay their workers. It is set to protect workers from extremely low pay, and its impact is analyzed using labor market diagrams where the minimum wage is shown as a horizontal line that may create a surplus of labor (unemployment) if it exceeds the equilibrium wage.

Labor Market Equilibrium

Labor market equilibrium is achieved when the quantity of labor supplied equals the quantity of labor demanded at a particular wage rate. Understanding how minimum wage laws affect this equilibrium involves analyzing shifts or distortions in the supply and demand curves, which can lead to unemployment if the mandated wage is above the natural equilibrium level.

Unemployment Effects

This refers to the potential increase in joblessness that may occur when a binding minimum wage is set above the market-clearing level. The resulting gap between the number of workers willing to work and the number of jobs available can lead to involuntary unemployment, which is often illustrated graphically in labor market models.

Elasticity of Labor Demand and Supply

Elasticity in this context measures how sensitive the quantity of labor demanded or supplied is to changes in wages. A less elastic labor demand means that employers are less likely to reduce hiring when wages are increased, while a more elastic supply means that workers are more responsive to wage changes. These elasticities play a crucial role in determining the magnitude of unemployment effects resulting from a change in the minimum wage.

Wage Distribution and Comparative Policy Analysis

Wage distribution refers to the spread of wages across all workers in an economy. Analyzing shifts in wage distribution over time provides insights into how a minimum wage may impact different segments of the labor force, particularly the lower end of the wage spectrum. Comparing such shifts over different periods helps determine whether the same minimum wage policy would have a smaller or larger effect on unemployment depending on the share of workers earning near the minimum wage.

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