A binding minimum wage results in:
A) higher wages for those who were working prior to the minimum wage implementation.
B) an increase in structural unemployment.
C) a decrease in the amount of cyclical unemployment.
D) lower actual unemployment rates since higher wages encourage more people to enter the labour force.

Question

Quizplus · Accepted Answer

A binding minimum wage increases the cost of labor for firms, which can result in a decrease in the demand for labor and an increase in structural unemployment. The higher wages for those already employed may lead to a decrease in cyclical unemployment, but the overall effect on unemployment is unclear. Higher wages may also discourage some individuals from seeking employment, which can offset any positive effects on unemployment rates.

A Binding Minimum Wage Results In