On July 24, 2009, the federal minimum wage rose to $7.25 per hour for most occupations in the private sector. While 29 states, some cities and counties, and the District of Columbia have established a minimum wage higher than this rate, the federal minimum wage has remained at $7.25 per hour. Over the past several years, support for an increase in the federal minimum wage has come from a wide variety of sources. Many of those who support an increase in the minimum wage believe this is one way the government should exercise its social responsibility in an attempt to reduce poverty. The following items address the idea of raising the minimum wage from the current federal minimum of $7.25 per hour.

1) Discuss any potential changes in the incentives for low-skilled workers to increase their human capital, and for employers to substitute capital inputs (technology and automation) for labor.

2) What might be the impact on government spending on entitlements such as welfare, the Supplemental Nutrition Assistance Program (SNAP, which is also known as food stamps), and unemployment compensation, in light of the fact that changes in the minimum wage can create changes in unemployment and underemployment?