A wage floor in a two- sector model does all of the following except:
A)reallocate workers to the low wage sector.
B)allocate workers to their most productive jobs.
C)reduce wages for unprotected workers.
D)cause some workers to be underemployed.

Question

Quizplus · Accepted Answer

A wage floor, such as a minimum wage, can lead to a reallocation of workers to sectors where the wage floor is not binding (often the low-wage sector), reduce wages for workers in unprotected sectors due to increased labor supply, and cause underemployment as employers reduce hours or jobs to compensate for higher wage costs. However, it does not necessarily allocate workers to their most productive jobs, as it distorts the labor market by setting a minimum wage that may not reflect productivity.

A Wage Floor in a Two- Sector Model Does All