The effect of legislation establishing a minimum wage above the market clearing wage is
A) unemployment.
B) a shortage of labor.
C) higher wages for all workers.
D) a shift of the demand for labor curve.

Question

Quizplus · Accepted Answer

When a minimum wage is set above the market clearing wage, employers are forced to pay higher wages to workers. This can result in some employers reducing the size of their workforce or reducing hours of existing workers to compensate for the increased cost of labor. As a result, unemployment may increase.

The Effect of Legislation Establishing a Minimum Wage Above the Market