minimum wage Flashcards
1
Q
analysis for imposing a minimum wage
A
- the effect of minimum wage can force the wage rate up from WR1 to Wmin1
- employers must now pay workers Wmin1 or above
- this effectively creates a new labour supply curve W2minS2
- this means that according to the model, employment falls from QL1 to QL2 as some workers will benefit from higher wages
- others will become unemployed as they is a contraction in demand for labour
- this aims to correct market failure caused by the free magnet wage that doesn’t guarantee a sufficient standard of living
- if unaddressed will increase workers poverty and inequality of incomes and wealth overtime
