Question #182943
Explain and illustrate the impact of a minimum wage on the labour market. When is a minimum wage effective? What kind of price control is it?
Expert's answer
When the market wage is low, a binding minimum wage can make employment more attractive to workers, which strengthens their search efforts and so reduces unemployment.If the market wage is small enough, a minimum wage improves labor market conditions and increases social welfare.
It has stabilized the post-depression economy and protect the workers in the labor force.
Minimum wage is a basic government-imposed price control.
