The higher the minimum wage, as compared to the equilibrium wage, the:
A)higher the structural unemployment rate.
B)lower the natural rate of unemployment.
C)lower the structural unemployment rate.
D)higher the cyclical unemployment rate.

Question

Quizplus · Accepted Answer

When the minimum wage is set higher than the equilibrium wage, it creates a surplus of labor and increases the rate of structural unemployment. This is because employers are not willing to hire as many workers at the higher wage rate, leading to a mismatch between the available jobs and the skills of the workforce. As a result, workers who are willing to work at the higher minimum wage but cannot find a job are considered structurally unemployed.

The Higher the Minimum Wage, as Compared to the Equilibrium