Question

Economists believe people should get paid according to the value of the output they produce. This is fairly easy to determine when you produce something physical, such as cupcakes. However, it becomes very difficult to measure if you are providing a service (perhaps teaching, or you're a doctor treating a medical condition). Regardless of how you measure the value of the output, the more productive you are the more valuable you are in the market to potential employers. This is the reason many economists are against the minimum wage and are for programs that contribute to improving an employee's productivity (such as education and training). There is surprising agreement with just how important education is in minimizing income inequality among economists.

Given this information, what would you recommend to policy makers? What do you think about various school districts having vastly different access to resources around the state, or even the country? Recall, spending more money on education does have an opportunity cost - be sure to include that in your answer. Note, this is NOT a couple sentence discussion. I'm expecting you to clearly demonstrate deep reflective thought.

Answer 1

Minimum wage laws create unemployment . This is because mandated minimum wages cause demand for labor to be lower than supply of labor which creates excess labor supply in the economy . So this minimum wage law is only helpful for people who are employed , the unemployed still remain in poverty . So the income inequality is not reduced . Also minimum wages raise the cost of production so this might even lead to lower supply in the market for goods and services .

So social programs at aim at human capital building is much more effective . Education and training make workers able to find jobs as per their own ability and also increases productivity . Different school districts have different access to resources causes disparity in level of productivity among individuals . Spending on education should be done by government since it produces positive externality . So privatization will lead to higher costs of education . This over spending in education causes increase in money supply in the econmy which can also lead to inflationary pressures .