One of the most debated topics in economics is whether raising wages leads to reduced supply due to higher production costs. On one hand, proponents argue that higher wages increase worker motivation, improve productivity, and boost consumer spending, ultimately benefiting the economy. On the other hand, critics claim that raising wages forces businesses to cut costs elsewhere—potentially reducing supply, increasing prices, and even leading to job losses. This project challenges students to engage in an in-class debate on whether increasing wages positively or negatively affects aggregate supply (AS).

Students will be divided into two teams. One team will argue that raising wages benefits the economy by increasing worker efficiency, reducing turnover, and stimulating consumer demand, which can lead to higher output and economic growth. They should use case studies where wage increases led to greater productivity and expansion, such as Henry Ford’s introduction of higher wages to improve efficiency and demand.

The opposing team will argue that raising wages negatively impacts supply, as businesses must compensate for increased labor costs by either reducing output, automating jobs, or passing costs onto consumers through higher prices. They should explore how supply-side economics suggests that wage increases can lead to inflation, layoffs, or reduced investment in production capacity.

A key focus of this debate will be evaluating historical and modern examples of wage increases, such as the introduction of minimum wage laws, the effects of raising the federal minimum wage, or cases where wage hikes led to outsourcing or job automation. Students should also explore how elasticity of supply, productivity improvements, and technological advancements influence whether higher wages actually decrease supply.

During the debate, students must use economic data, theoretical arguments, and case studies to support their stance. The debate will conclude with a class discussion on whether wage increases should be prioritized as an economic growth strategy or if their risks outweigh the benefits. The goal of this project is for students to critically analyze how wage policies influence supply-side economics, business costs, and overall market efficiency.