Please select only 1 of the following options and answer each of the questions related to that option. Your responses should be thorough and well supported. You are encouraged to use our textbook and the supplemental online book for this class, which is called Popular Economyths.
A good, well-reasoned, detailed answer should be at least 1.5 to 2 pages (total) in length (and please do NOT rewrite the questions). You need to answer each of the questions for the option you select.
OPTION 1 – 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) Describe who the suppliers and demanders are in the labor market. Is a government-mandated minimum wage a price floor or ceiling? Discuss the effect of raising the minimum wage from a supply and demand standpoint, making sure to address the concept of surplus or shortage, and specify what that shortage or surplus is most commonly called in economic terms.
2) Raising the minimum wage will also affect the labor costs of businesses. What is going to happen to the prices these businesses charge for their products? And who is going to be most affected by these price changes, those with low incomes or those with high incomes?
3) Discuss any potential changes in the incentives for low-skilled workers – those who keep their jobs and their hours – to increase their human capital when the minimum wage increases. What about those who lose their jobs or never get hired? Discuss the incentives 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 because of the changes in the minimum wage and its impact on 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? What do opponents of the minimum wage law believe workers’ wages should be based on? Which one is sustainable and why?
For the sake of comparison, how should students be graded in class, based on their performance or level of need?
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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 simple thing could the employee do if they believed they were being exploited?
7) What percentage of American workers get paid above minimum wage? In general, why do such workers get paid more than the government-mandated minimum wage if employers are supposedly so greedy?
8) Compare and contrast some of the information contained in the three videos:
Obama: “Raise Minimum Wage to $9 an Hour” – SOTU 2013
A $15 minimum wage would hurt those it’s meant to help – YouTube
We the Internet TV: Pledge for $15
Describe the main points of each video. Which one or two videos do you agree with more from an economic perspective and why? Be specific!
9) Based on your previous 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? You need to give a thorough reason for your answer.
10) Who should get to decide how much a worker gets paid, the worker and their employer or a politician? WHY?
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OPTION 2 – Taxes
It has been said that nothing in life is guaranteed except for death and taxes. The next questions ask about the three tax structures as well as rate rates.
A lot of students say that some people pay “more (or less) in taxes” than others, but they often confuse tax rates (in percentages) with the amount of tax paid (in dollars). Be sure to answer questions in this option with references to the differences between taxes paid in dollars versus percentages.
- Please state whether you prefer a progressive, regressive, or flat (proportional) tax system and WHY. Is your preference more in accordance with the concept of equality of opportunity (which is equal treatment) or equality of outcome (which is unequal treatment)? BE SPECIFIC. Which tax system incentivizes taxpayers to earn more money and which structure disincentivizes taxpayers to work harder and earn more money.
2) Please write about marginal tax rates and whether you believe they need to be changed in general. More specifically,
- A) If you believe in a flat tax rate system, should income tax rates be raised or lowered?
- B) If, however, you think a progressive tax rate is best:
- i) should taxes on low-income earners be raised or lowered?
- ii) should taxes on average-income earners be raised or lowered?
iii) should taxes on high-income earners be raised or lowered?
- C) If, however, you think a regressive tax rate is best:
- i) should taxes on low-income earners be raised or lowered?
- ii) should taxes on average-income earners be raised or lowered?
iii) should taxes on high-income earners be raised or lowered?
Regardless of which you chose (A, B, or C) be sure to give your reasons WHY you feel the way that you do.
3) Please explain HOW the tax rate changes (the increase or decrease you advocated for in Questions #2 above) will affect EACH of the following:
- a) economic growth: job creation, investment, incentives to work more, and tax avoidance
- b) the budget: the difference between tax revenue and government spending
- c) economic “fairness”
Your answer needs to have a discussion related to the Laffer Curve, especially with respect to the budget (and to government revenue in particular). In addition, please give your definition of economic “fairness” and WHY you believe that.
4) Please watch the following two videos:
Robert Reich: Why Taxes Have to be Raised on the Rich
Is America’s Tax System Fair?
Describe the main points of each video in detail. Which video do you agree with more? Please describe WHY. Which video recommends treating people equally and which one does not?
5) Please read the following articles and graphs:
What You Don’t Know About the Top One Percent
Tax Foundation: Effective tax rates per income category
Income tax share by income category
Describe the main points of each article or graph in detail.
Based upon these articles and graphs: By income percentile group, who doesn’t pay their “fair share” of taxes and who pays more than their “fair share” in your opinion? How do you arrive at that opinion?
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OPTION 3 – Capitalism and Socialism
There are two major economic theories – Classical and Keynesian. Classical theory is closely aligned with what is popularly known as capitalism, while Keynesian theory forms much of the foundation for socialism.
1) Obviously, both supply (production) and demand (money or purchasing power) are necessary in a functioning market. However, there is disagreement regarding which one “comes first.” Do you believe supply or demand “fuels” the economy and WHY? Why is the other theory incorrect in your view? BE SPECIFIC HERE
2) Please discuss the differences between the two major economic philosophies, Socialism and Capitalism. Be sure to mention:
- a) the differences in their ultimate goals
- b) the differences in their means of attaining those goals, i.e., their fiscal policies (tax rates and government spending)
- c) the differences in their attitudes toward the ability of government to direct the economy successfully
- d) the differences in their attitudes toward the ability of voluntary transactions between private individuals to direct the economy successfully
- e) the differences in their attitudes towards profits
3) Collectivism is the idea that the most important thing about a person is their group identity, such as their income, race, gender, sexuality, etc. Cultural Marxists and advocates of critical race theory (CRT) suggest that some identity groups are oppressed and that others are oppressors. Many modern-day socialists can be described as collectivists and cultural Marxists. See the online book Popular Economyths for more details. Please explain how many socialists currently advocate for socialist policies based upon collectivist and cultural Marxist ideas. What are some of the good and/or bad consequences of trying to base economic policies upon such ideas?
4) Capitalism is based largely on the idea of individualism and liberty, or freedom. Individualists see the person and all their unique characteristics rather than their identification in certain groups. Capitalists also view human freedom as a high priority where individuals can be largely responsible for determining their own success and choosing how to best live their lives. Please explain how capitalists incorporate the ideas of individualism and liberty into their ideas concerning the role of government in the economy. What are some of the good and/or bad consequences of trying to base economic policies upon such ideas?
5) Please watch the following:
Very Good Video About Socialism that Bernie Sanders Should Just Steal
The Bigger the Government…
Describe the main points of each video in detail.
Which video do you agree with more? Which type of economy may lead to people with “better” characteristics? Please describe WHY.
6) Compare and contrast nations that have been largely capitalistic with those that have been more socialistic. Give an example of each and discuss some of the differences between the quality of life in those nations, particularly with respect to GDP per capita, economic freedom, medical care, the number of people who have been killed by their government, and the number of people who have been pulled out of poverty over time.