Minimum-wage legislation is less likely to have adverse effects on employment when the:

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When the affected labor market is monopsonistic, there is only one buyer of labor, which gives the buyer significant market power to influence wages. In this case, minimum-wage legislation can have a positive effect on employment by reducing the power imbalance between employer and employee. In perfectly competitive labor markets (D), minimum-wage legislation can have adverse effects on employment because it raises the cost of labor, making it more expensive for firms to hire workers. In an economy with high unemployment (B), minimum-wage legislation can also have adverse effects on employment by potentially discouraging firms from hiring new workers. The derived demand for labor shifting to the left (C) would lead to a decrease in employment and potentially worsen any adverse effects of minimum-wage legislation.

Minimum-Wage Legislation Is Less Likely to Have Adverse Effects on Employment