Minimum Wage

The Debate About the Minimum Wage

The purpose of this site:

to provide a place to list Open Educational Resources (OER) dealing with the topic of the minimum wage
to provide various resources and material debating the issue of the minimum wage
to provide a platform to showcase students perspectives on and analyses of the minimum wage laws.

Start Here

A great place to learn about the minimum wage under the assumption of perfectly competitive labor market is the following chapter from an OER textbook:
Raising the Wage Floor
A great place to learn about the minimum wage under the assumption of monopsonistic labor market is the following section of an OER textbook:
Monopsony and the Minimum Wage

Video lecture about the minimum wage by Prof. Dolar

The Assignment: Does minimum wage cause unemployment?

Due Date: On the day of the final exam.
The minimum wage has evoked controversy since its passage as part of the Fair Labor Standards Act of 1938. Proponents of the minimum wage argue that a higher minimum wage will help create jobs, grow the economy, help the war on poverty, and will reduce wage inequality. Its critics stress that the minimum wage causes unemployment, hurts the economy, and actually harms the low-income people that were supposed to be helped.
These are clearly very divergent viewpoints. Part of the disagreement simply reflects normative difference of opinion. Thus, it is perfectly respectable for two people to agree on the positive consequences of increasing the minimum wage but to disagree on the normative questions of whether it should be increased. Unfortunately, there is still quite a bit of disagreements even among economists concerning the answer to the following seemingly straightforward positive question: What are the employment effect of raising the minimum wage?
The main purpose of this assignment is for you to carefully consider the impact of increasing the minimum wage, focusing on the positive rather than normative analysis.
In your analysis you should apply the models, tools and techniques develop in this class. Your analysis should start first with a brief explanation of the problem and its complexities. You should explain the effects of the minimum wage laws in perfectly competitive markets. Next, you should compare the size of unemployment when the labor supply and demand are very elastic with the results predicted when the two curves are very inelastic. In addition, what happens when the minimum wage is increased in a monopsonistic labor market? You should carefully define all terms and concept and include all necessary graphs that will help you explain your points more clearly. Make sure that you properly label all graphs, figures, and tables and appropriately refer to them in the text.
Given that the effects of the minimum wage on employment differ based on the assumptions made about labor supply and demand (elastic vs. inelastic) and the structure of the labor market (perfectly competitive vs monopsonistic) how can economists then try to find the answer this question?
Carefully explain what methods economists could use to explore this social issue. Evaluate the empirical evidence and data and write your own interpretive analysis.
HINT: Can you think of few reasons why an increase in minimum wage would not lead to an increase in unemployment (besides the arguments you made under monopsony)? Can you think of few reasons that the unemployment would go up, even if the minimum wage stays the same? How do the answers to these questions impact the reliability of empirical data?
You can also think about what competitive labor market predicts about the relationship between workers’ productivity and wages. What does the data say about this? What does all this suggests about the level of competition (on the demand side) in the labor markets?
Be sure to properly cite sources you use.

How to Submit Your Assignment

You can submit the assignment two ways.
One way is by preparing a traditional assignment where you create one document in a pdf format that you will submit via our learning management system on the day of the final exam. In that case your assignment should include a title page with your name, title, and date! All the pages must be numbered!
A second way, and a much more exciting way for you to prepare this assignment is to create a website with all the text, graphs, and links that are relevant for analysis posted online. As you know, we are using an OER textbook in this class. This means that all the material that you are using is provided to you free of charge since the authors of the text decided to use an open license. In the spirit of giving back, this is your opportunity to shift your role from being a knowledge consumer to a knowledge creator. I challenge you to prepare and write an assignment that is not destined for the garbage bin after I grade it, but to create an assignment where your work adds value to the world.
In order to get started with your own site (google sites), please watch this simple instructional screencast.
Feel free to come and talk to me about your assignments and send me your preliminary versions for comments and review in order to improve your grade on this assignment. Feel free to discuss your assignments with other students, however all essays must be written individually by each student. No co-authoring allowe