Several proposals have been made to encourage employers to hire former welfare recipients, but there has been concern that such subsidies will lead to welfare recipients' simply displacing other unskilled workers from their jobs.
a. Using standard demand and supply diagrams, assume that former welfare recipients are identical to other unskilled labor, and that work requirements simply shift the supply curve of unskilled labor. What happens to employment and wages of unskilled workers?
b. Now assume that there is a minimum wage that is above the equilibrium level of wages for unskilled workers. What happens to employment and wages of unskilled workers? What happens to the unemployment rate?

c. Now assume that the government provides tax subsidies to employers who hire former welfare recipients. Will this affect the total number of unskilled workers hired? Will it affect which unskilled workers get hired?
d. Now assume the government provides tax subsidies for the employment of all unskilled workers. What happens to employment, wages, and the unemployment rate?
e. Now assume that welfare recipients are slightly less productive than other unskilled workers, say, because they have been out of the labor market; if they return to the labor market for a short period of time, say, six months, their productivity becomes equal to that of other unskilled workers. If there is a minimum wage, but no special tax provisions for welfare recipients, what will happen to employment of welfare recipients? What will be the consequences of a short-term subsidy for hiring former welfare recipients?