What is the effect if minimum wage on employment?
Once again this draws on the laws of supply and demand. So with a minimum wage, even though the equilibrium of the supply and demand of the labor force might be at a lower rate, the wages will be enforced causing the demand to be less than optimal.
For instance the minimum wage is $20 when the equilibrium is $15. The $5 difference will cause employers to be unwilling to hire as optimally as the market dictates but to cut back on employment leaving some people unemployed. That will cause the unemployment to be higher than it is without a minimum wage.
As a result, most countries with a minimum wage have a good social payment plan in order to support those without the good fortune to be having a job.
I really should be learning how to put up a graph to better explain the situation.
Once again this draws on the laws of supply and demand. So with a minimum wage, even though the equilibrium of the supply and demand of the labor force might be at a lower rate, the wages will be enforced causing the demand to be less than optimal.
For instance the minimum wage is $20 when the equilibrium is $15. The $5 difference will cause employers to be unwilling to hire as optimally as the market dictates but to cut back on employment leaving some people unemployed. That will cause the unemployment to be higher than it is without a minimum wage.
As a result, most countries with a minimum wage have a good social payment plan in order to support those without the good fortune to be having a job.
I really should be learning how to put up a graph to better explain the situation.
