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Economic Policy Problem ,[object Object],TOPIC:  MINIMUM WAGE,[object Object],Aaron Beye,[object Object],Elliot Haas,[object Object], Shawn Hastings,[object Object],Jay Schrade ,[object Object]
ECONOMIC PROBLEM,[object Object],Minimum wage raises the total cost for firms, forcing them to reduce levels of employment, which is a major factor  in the current unemployment problem.,[object Object]
PROPOSED SOLUTION,[object Object],Do away with the minimum wage to boost the employmentof labor in the market. This will decrease unemployment and reduce outsourcing to foreign countries.,[object Object]
Economic Problem of Outsourcing,[object Object],Minimum wage increases has caused firms to ,[object Object],move businesses to other,[object Object], countries through outsourcing.  ,[object Object],This has lead to greater unemployment and ,[object Object],the destruction of low labor jobs in the U.S.,[object Object]
When did outsourcing start?,[object Object],Outsourcing occurred during the 1980’s.,[object Object],This started with the outsourcing of low labor skilled jobs.,[object Object],Occurred because of Reagan's tax system and how it decreased the size of government programs.,[object Object],Is now still occurring but mostly with high skilled labor.,[object Object]
Where has the labor gone?,[object Object],The low skilled labor has gone to China and Mexico.,[object Object],The high skilled labor is currently going to India.,[object Object],With China now starting to become more technologically advanced low skilled labor is starting to move to other Asian countries: such as Malaysia.,[object Object]
Why did outsourcing occur?,[object Object],Companies outsource because the U.S. has higher labor costs than other countries.,[object Object],Here in the U.S. the minimum wage in $7.25 while in china workers work for $1 to $2.,[object Object],Also education levels are rising above the U.S. in other countries, this is why high skilled labor is leaving.,[object Object],Easy to move businesses because no language barrier.,[object Object]
How do we keep jobs here?,[object Object],Abolish the minimum wage so it can settle at equilibrium.,[object Object],Because of increased shipping costs firms will then stay in the U.S. even with a higher wage here in the U.S.,[object Object],Studies show that the wage will settle around $5.,[object Object]
How do we bring the companies back?,[object Object],Companies will not return do to the high overhead costs involved in moving production.,[object Object],You have to give them incentives to move.,[object Object],We can do this through giving tax breaks to companies here in the U.S..,[object Object],We can give grants or lower interest rates to entrepreneurs.,[object Object],We can then subsidize the overhead costs that firms take on by moving back to the U.S.,[object Object]
	According to a 1978 article in American Economic Review… ,[object Object],90%,[object Object],of economists surveyed agreed that having a minimum wage INCREASES unemployment among low-skilled workers!,[object Object]
If we were to RAISE minimum wage…,[object Object],Workers will not produce enough to pay for the firms cost of labor at a higher rate,[object Object],Therefore…Firms seek out other, more productive methods of doing the jobs. (ex. Robots, Electronics),[object Object],Minimum Wage is INCREASED,[object Object],Firms look to find alternative solutions to human labor when wage rates are too high!  (Bad for unemployment rate),[object Object]
If we ELIMINATE minimum wage, or even just decrease it…,[object Object],MINIMUM WAGE,[object Object],Low Skilled U.S. Workers are more appealing to U.S. firms due to lower  labor costs.,[object Object],[object Object]
More profits for firms  ,[object Object]
THIS policy REDUCES the amount of “Under the Table” labor operations!,[object Object],BENEFITS:,[object Object],Companies will not be as tempted to illegally hire, fire, and pay illegal immigrants with no records of transaction.,[object Object],These low skilled jobs will become more available for “low skilled” U.S. citizens, probably replacing some illegal immigrants that are in the workforce today.,[object Object]
Overall Effects on Low Skilled Workers,[object Object],Firms will increase use of low skilled laborers ,[object Object],More profit for firms, lower unemployment rate,[object Object],Less “Under the Table” pay,[object Object],Government will receive more income taxes; firms are less likely to take advantage of illegal non-English speaking immigrants when U.S. citizens are willing to work for the same rate,[object Object]
General welfare effects on workers ,[object Object],‘Classical’ thinking: Price floors = BAD!,[object Object],Deadweight Loss:,[object Object]
Ctnd.,[object Object],No consensus in economic academia,[object Object],Most leaning toward classical thought,[object Object]
Welfare Effects on Poor,[object Object],Whole theoretical idea was to help low-income workers,[object Object],Did it work?,[object Object],Depends on whom you ask, but . . .,[object Object],Minimum wage increases the proportion of families living at or below the poverty line (NSW 2005),[object Object],Lowers welfare according to all common, traditional welfare measures (GPW 2001),[object Object],Including the Gini Index,[object Object],Gini = Gap between actual and “equal” distribution of wealth divided by total wealth,[object Object]
Continued,[object Object],Some are better off,[object Object],If they still have a job,[object Object],Some lose their jobs,[object Object],Some have reduced working time,[object Object],Net effect of above 3 is a welfare loss for society (NSW 2004),[object Object]
Some Good Things,[object Object],Employers don’t reduce benefits when minimum wage increases (S&K 2004),[object Object],Health insurance,[object Object],Pensions,[object Object],Highly inelastic demand for labor can accommodate a minimum wage fairly well,[object Object],Entirely dependent on the specific market,[object Object]
What Does it All Mean?,[object Object],Let the Market decide!,[object Object],Unionization is good (DFL 1996),[object Object],Better that unions and firms clash than the government impose a minimum wage,[object Object],Most markets are not uniform,[object Object],Often not even similar,[object Object],Homogeneous standards for a heterogeneous economy will lead to inefficiency and welfare loss,[object Object]
ECONOMIC PROBLEM,[object Object],	Minimum wage raises the total cost for firms, forcing them to reduce levels of employment, which is a major factor in the current unemployment problem.,[object Object],PROPOSED SOLUTION,[object Object],Do away with the minimum wage to increase competitiveness with foreign markets and boost the employmentof labor in the market.,[object Object]
WHY PROPOSAL SHOULD BE CARRIED OUT ,[object Object],[object Object]
Minimum wage has adverse effects on low-skilled workers
The supposed benefits of the minimum wage are not so great,[object Object]

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Economic Policy Proposal (Minimum Wage)

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