An effective minimum wage creates a surplus of labor and increases the level of unemployment.

Name: An effective minimum wage creates a surplus of labor and increases the level of unemployment.
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Question

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When the minimum wage is set above the equilibrium wage, there is an excess supply of labor (surplus) which leads to an increase in unemployment as employers cannot afford to hire as many workers at the higher wage.

An Effective Minimum Wage Creates a Surplus of Labor and Increases