Suppose that a 5% increase in the minimum wage causes a 5% reduction in employment. How would this affect employment and how would it affect workers?
A minimum wage, to be effective, needs to be set above the market wage rate. When this happens, employers have to follow the minimum wage guidelines. Not all workers will actually get the benefit of a higher wage.
Answer and Explanation: 1
In the labor market, there will be a surplus of workers. This is because higher wages would force firms to make some workers redundant. At the same...
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fromChapter 7 / Lesson 12
Understand the minimum wage definition in economics. Discover the history of minimum wage in the U.S., and explore the advantages and disadvantages of imposing a minimum wage. Learn the difference between federal and state minimum wage.