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What Are The Effects Of A Minimum Wage Set Below The Equilibrium Wage ?

The effects of a minimum wage set below the equilibrium wage are:

Firms will hire fewer workers than they would have done in the absence of the minimum wage, since now it is more expensive to employ them. The demand for labor falls and unemployment rises.

Workers who would otherwise have been employed at the unregulated wage level find themselves unemployed, or working at a lower wage than they would have received had there been no minimum wage law. They are worse off than they would otherwise have been because they are not working at all or are working less hours than they would like to work. They may also be worse off because they are receiving lower wages than they would have received if there had been no minimum wage law in place.

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Last modified: August 16, 2022

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