Use the news clip in Problem 21.

a. Would a cut in the tax on small business profits offset the effect of the higher minimum wage on employment? Explain.

b. Would a cut in the Social Security tax that small businesses pay offset the effect of the higher minimum wage on employment? Explain.

Problem 21

On a graph of the market for low-skilled labor, show the effect of the increase in the minimum wage on the quantity of labor employed.

The rise in the federal minimum wage will boost the wages of the lowest-paid U.S. workers from $5.15 to $7.25 an hour. Republican leaders, backed by smallbusiness and restaurant groups, argued that the higher minimum wage would cripple the economy, so it must be accompanied by tax cuts for small businesses.