7. Currently, there is a movement to increase the federal minimum wage to $15 an hour. Proponents argue that an increase is necessary to provide workers with a 'living wage' while opponents argue that such an increase could decrease employment. Given that the federal minimum wage is $7.25 an hour, several states and localities have already raised the applicable minimum wage.1

a. first, using the cost-minimizing input rule as a starting point and if all else remains equal, discuss the impact of raising the federal minimum wage to $15 an hour on the use of capital and labor.

b. According to the Bureau of Labor Statistics, in 1979, 13.4 percent of workers earned the minimum wage, in 2018, only 2.1 percent of workers were at or below the minimum wage.2 Of those earning at or below the minimum wage, 38.3 percent were considered full-time workers. Many of those below the minimum wage were tipped workers. Average hourly wages in every major industry in the United States were above $15 an hour in December 2019.3 Using demand and supply analysis and this information, discuss the potential impact of raising the federal minimum wage to $15 an hour.