Effects of raising the minimum wage: Research and key lessonshttp://journalistsresource.org/studies/economics/inequality/the-effects-of-raising-the-minimum-wage
Written Response Questions
Article 1: Effects of raising the minimum wage: Research and key lessons
Article Review: This article does a good job or providing a broad overview of the existing research on the minimum wage. I also think it is a fair summary and provides evidence from both those who support and those that are against the raising the minimum wage.
Question 1: Draw a series of graphs for the labor market for low wage (minimum wage) workers. You should draw three graphs. In the first, there is no minimum wage (no regulation). In the second, include a minimum wage of $7.50 and in the third graph include a minimum wage of $10.00 per hour. On each graph label the supply/demand graphs, producer and consumer surplus and deadweight loss.
· Your graphs should look similar in structure/presentation to Exhibit 10.10 (except there is no tax in this question).
Question 2The analysis we traditionally do in Econ 101 involves fixing one variable and holding the remaining variables constant. We do not consider secondary impacts or how economic agents react to the change we are considering. Based on the information in the article, what additional impacts does raising the minimum wage have beside those shown in Question 1?
Question 3: The articlespends some time discussing a study by Card and Krueger. How would you classify their study? Is the situation they investigate a natural experiment? Do you think their results are suggestive of causation or are merely picking up a correlation? Support your statements with information from the article.
· You may want to consider what you wrote in Question 2 about additional impacts and whether the design for the Card and Krueger study controls for these in their “treatment” and control groups.
Question 4: If firms that employed minimum wage workers operated under perfect competition, how would we expect the introduction of a minimum wage to impact their industry? Based on the information in the article, do you think the firm/companies that employ minimum wage workers operate under perfect competition? Support your answer with details from the article.
· You may want to consider the features of competitive markets discussed in Chapter 4 and Chapter 7 and the other market structures discussed in Chapters 12 and 14.
Article 2. Robots Seem to Be Improving Productivity, Not Costing Jobs
Article Review:This article discusses the impact robots have had on labor productivity. The questions focus on topics covered in Chapter 6 and Chapter 11.
Question 1:Assume that the market for automobiles is at the perfectly competitive equilibrium. How would the introduction of robots in the manufacturing process impact the equilibrium? Justify your assumed impacted based on information included in the article.
· Your answer should include a pair of graphs similar to Exhibits 6.16 and Exhibit 6.17.
· You may also want to consider Exhibit 6.14 when forming your answer.
Question 2: Based on the content of the article, do robots appear to be a “labor-saving technology” or a “labor-complementary technology” and is this the result that you expected. Use the authors’ results and/or statistics to support your answer.
Question 3: Based on your answer to Question 2, how would the labor market be impacted by robots? For simplicity assume we are discussing the labor market for automobile workers.
· See Section 11.2.
Question 4: Do you think that robots increased or decreased wage inequality? Support your answer with information from the article. Your answer should mention how robots potentially impact the VMPL.
· Consider the factors that drive wage inequality listed in 11.3.