Senator Fictional wants to reduce income inequality in the U…
Questions
Senаtоr Fictiоnаl wаnts tо reduce income inequality in the United States. He proposes a bill that will more than double the federal minimum wage (from $7.25/hour to $15/hour). With respect to reducing income inequality, discuss the possibilities (pros and cons) of this plan. The U.S. Bureau of Labor Statistics published data on unemployment rates by demographic group for the fourth quarter of 2020. These are provided in the table below. Overall, the unemployment rate stood at 6.5% for all labor force participants 16 and over, so 1 in about 15.5 workers were jobless. As has historically been the case, the highest unemployment rate (currently 22.8%) is for 18-19 year old African American males, followed by 18-19 year old African American females (currently 20%). Thus, among 18-19 year old African Americans, 1 in 4.4 males and 1 in 5 females has been unable to secure a job. If Senator Fictional's plan becomes law, whereby firms are required to pay twice the current rate for entry-level employees, discuss the likely impact on these workers in particular, both in the near-term and the longer-term.
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