Consider a low-wage market. Workers in this market are not presently covered by the minimum wage, but the government is considering implementing such legislation. If implemented, this law would require employers in the market to pay workers a wage rate of 10 per hour. Suppose that all workers in the market are equally productive, that the current market clearing wage rate is 8 per hour, and that at this market clearing wage there are 6,000 employed workers. Further suppose that under the minimum wage legislation, only 5,000 workers would be employed and 3,000 workers would be unemployed. Finally, assume that the market demand and supply schedules are linear and that the market reservation wage, the lowest wage at which any worker in the market would be willing to work is 2.

(a) Compute the value of the impact of the policy on employers, workers and society as a whole.

(b) Suppose the government now decides to hire 2,000 of the unemployed workers at the minimum wage. There are four different ways of estimating the social cost of this public employment plan. Calculate and explain each of them.