Do economics suggest the minimum wage is a good or bad idea? Read the first part of the article and check your ideas.

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1 b b B What are the pros and cons of having a minimum wage? Do economics suggest the minimum wage is a good or bad idea? Read the first part of the article and check your ideas. Quartz September 2017 Economists still can t decide whether the minimum wage is a good thing Economics suggest the minimum wage is a bad idea. The job market, according to elementary economics, is like any other market. It works best if wages are set by supply and demand, not by any other factor, like government rules. Just as the government doesn t set a minimum price for shirts or avocados, so they should not be telling employers the lowest amount they can pay workers. Standard economic theory says a government-enforced minimum wage risks the loss of jobs, as there could be some employers only willing to hire workers at a wage below the minimum, and some workers without jobs who would take one that pays below that minimum. By mandating a minimum wage, the government is harming both employers and workers, and hurting the economy s productivity to boot. What is the minimum wage where you live? Do you think it is set at the right level? B What is the origin of the minimum wage and in which country was it first introduced? Read the next part of the article and check your ideas. The minimum wage s origins are traced to workers movements in industrializing nations in the 19th century. Long hours, low wages, and lack of safety led unions and social reformers to advocate for a variety of laws to protect factory workers. The first minimum-wage laws, which appeared in the 1890s in New Zealand and Australia, and the 1900s in the United Kingdom, were not national wage minimums, like there is today in the US, but minimums for specific industries where there were concerns that workers were being taken advantage of. The minimum wage arrived in the US in the 1910s, but only in some states, and only for women and children. The US set a minimum wage of 25 cents per hour in 1938, and has raised it intermittently since (it is not tied to inflation). From the start, it was clear the minimum wage would be a test for economic theory. The working of this virtual fixing of a minimum wage will be watched with interest by economists, wrote economists Beatrice and Sidney Webb in their 1897 book Industrial Democracy. (The Webbs, a married couple, were among the founders of the London School of Economics.) Do you know when the minimum wage was introduced in your country? 1/4

2 B The article says that from the start, it was clear the minimum wage would be a test for economic theory. Read the final part of the article and find out what different economists think about the minimum wage and how views have changed since its introduction. When a recent study found that a sharp rise in the minimum wage in Seattle led to job losses and fewer hours for low-wage workers exactly what supply and demand theory would predict it led to a vociferous debate within the economics profession. The primary complaints of those who found fault with the research was that certain types of workers who may have benefitted from the wage rise were excluded from the analysis. Though economists debated the merits of the minimum wage throughout the 20th century, serious empirical analysis of the issue did not appear until the 1970s. At that point, economists began analyzing the impact of the minimum wage by statistically examining what happened to jobs across time when the minimum wage increased. These researchers generally found that a wage minimum removed some jobs from the economy, though they disagreed about how many. By the 1980s, it was generally accepted that the minimum wage had a negative impact on employment. A poll of graduate students at top economics programs in the US in 1987 showed that more than 70% agreed that the minimum wage increases unemployment among young and unskilled workers, versus 18% who disagreed and 9% who didn t have an opinion. A turning point in the minimum-wage debate came in 1993 when David Card and Alan Kreuger, economists at Princeton at that time, published the paper Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania. The research examined the impact of New Jersey s minimum wage increase from $4.25 to $5.05. They compared the labor market outcomes for New Jersey s fast-food workers with nearby fast-food workers in Eastern Pennsylvania, where the minimum wage was not raised. They found no difference between them. In fact, they claimed, a number of studies showed that the minimum wage had a positive effect on employment. Earlier research, they argue, was flawed because it relied on statistical techniques that poorly isolated the effect of the minimum wage compared to other factors. Some economists were appalled by Card and Kreuger s stance. The Nobel Prize-winning economist James Buchanan wrote the following in a 1996 Wall Street Journal op-ed: Just as no physicist would claim that water runs uphill, no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimal scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. It has been two decades since Card and Kreuger originally made their prominimum wage argument, and they stick by it today. The economists position is no longer unusual. A 2012 joint report by the World Bank, IMF, and OECD recommended that governments set a minimum wage. Still, the debate rages on in the economics world, perhaps because it goes right to the heart of how one views free markets. If the minimum wage is good policy, it upends all of orthodox economic theory. 2/4

3 b Wading through assessments of the impact of the minimum wage is a dizzying experience. For every study by respected economists that clearly shows harmful effects, there is another that shows the exact opposite. In the case of the recent Seattle study, there was another study that came out around the same time that suggested the increase didn t impact employment at all. All economists seem to agree on is that there is some limit to how high the minimum wage can go without causing serious damage besides that, it s hard to know what to believe. Many more years of conflicting study results and methodological criticism is ahead of us. Which theories and opinions from the article do you agree with the most? V Rearrange the letters in brackets to complete these extracts from the article: 1 It works best if (agews) are set by supply and demand, not by any other factor, like government rules. 2 Just as the government doesn t set a minimum price for shirts or avocados, so they should not be telling (loyeremps) the lowest amount they can pay (rkerwos). 3 as there could be some employers only willing to (ireh) workers at a wage below the minimum 4 certain types of workers who may have benefitted from the wage (isre) were excluded from the analysis. 5 there was another study that came out around the same time that suggested the increase didn t impact (meneoymplt) at all. V Write questions to ask the other members of the class using the words above. e.g. In which sectors are wages the highest and the lowest, in your opinion? 3/4

4 E What do the highlighted expressions in these extracts from the article mean? Quartz September 2017 The job market, according to elementary economics, is like any other market. They compared the labor market outcomes for New Jersey s fast-food workers......because it goes right to the heart of how one views free markets. V There are other financial expressions with market in English. Complete the gaps to make the expressions defined. V 1 market an exchange in which securities are bought and sold 2 market a market characterised by excess supply 3 market a market characterised by excess demand 4 the market buy all or most of a commodity or stock so that its price goes up 5 out of the market charge so much for a product or service that no one will buy it 6 market the amount for which something can be sold 7 the market interested in buying 8 market a country or economy that is not commercially developed but is expected to experience growth and advance towards development 9 market the portion of a market controlled by a particular company or product Complete these sentences with the expressions above: 1 I m a new car. If you see one at a good price, let me know. 2 We have had to drop the price of our house because it s a. 3 The company tried to by buying all the available stock which was for sale. 4 If we increase our prices too much we will our young customers. 5 When interest rates are low people tend to invest in the. 6 We are spending a lot on advertising to increase our. 7 Our sales are increasing rapidly in like India. V Write sentences of your own with the expressions. 4/4

5 Teacher s notes 1 student pages 4 week of mid-intermediate+ (B2+) V Rearrange the letters in brackets to complete these extracts from the article: 1 wages 2 employers / workers 3 hire 4 rise 5 employment E What do the highlighted expressions in these extracts from the article mean? job market = the number of jobs that are available in a particular place or for a particular type of work labor market = the availability of employment and labor, in terms of supply and demand free market = an economic system in which prices are determined by unrestricted competition between privately owned businesses V There are other financial expressions with market in English. Complete the gaps to make the expressions defined. 1 stock 2 buyer s 3 seller s 4 corner 5 price 6 value 7 in / for 8 emerging 9 share V Complete these sentences with the expressions above: 1 in the market for 2 buyer s market 3 corner the market 4 price / out of our market 5 stock market 6 market share 7 emerging markets