Answer to Question #182943 in Microeconomics for Noor

Question

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?

Answer 1

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.