If the minimum wage is set above the market clearing wage, wages will be "sticky" in the downward direction.

Question

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When the minimum wage is set above the market clearing wage, employers will be unable to reduce wages to match the supply and demand in the labor market. This creates a situation where wages become "sticky" in the downward direction, as employers are legally obligated to pay employees at least the minimum wage. As a result, unemployment may increase as employers are less willing to hire workers at the higher wage rate, and some workers may lose their jobs altogether.

If the Minimum Wage Is Set Above the Market Clearing