The federal minimum wage increased from $5.15 to $5.85 in July 2007, then to $6.55 in July 2008 and to $7.25 in July 2009. Meanwhile, the California State minimum wage has remained constant at $8.00 and the San Francisco minimum wage has increased because of indexation to $10.24. In the same period, national teen employment rates declined, as they have since 2001.
Write a three page essay analyzing:
1. The predictions of minimum wage effects on employment that follow from each of the three main models: the standard competitive model, the monopsony model and the efficiency wage model.
2. How you would go about distinguishing the correlation between the national minimum wage and national teen employment rates from the causal effects of the minimum wage on teen employment rates.
3. The likely causal effects on employment of the increases in the federal minimum wage on teen employment in the U.S and in California.
4. The likely causal effects of minimum wage indexation in San Francisco.
Base your essay on the textbook notes (http://wps.aw.com/aw_ehrensmith_mlaborecon_9/33/8616/2205850.cw/index.html from chapter 1 to 4). There is no single correct answer, do not need to use diagrams or equations, just clearly written English.
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