Existing jobs in this scenario the quantity of labor

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existing jobs. In this scenario, the quantity of labor supplied will continue to exceed the quantity of labor demanded aslong as the minimum wage remains above the market equilibrium wage. The resulting surplus of labor creates a poolof unemployed workers—people who would like to work at the prevailing minimum wage, but who cannot find a job.If the minimum wage is $6.00, employers will not be able to attract enough workers. This causes them to raise thewage until the quantity of labor supplied is equal to the quantity they demand (this occurs at $8). That is, the shortageputs upward pressure on wages and the market is able to reach equilibrium.If the minimum wage is instead set at $8.50, employers will attract more workers than they are willing to hire. Becausethe minimum wage prevents employers from lowering wages to the equilibrium rate, a minimum wage of $8.50 isconsideredbinding.
A binding minimum wage will contribute to a persistent surplus of labor in this market, generatingstructuralunemployment. Structural unemployment is unemployment that arises from a mismatch between the skills of theexisting labor force and those required to perform available jobs. One source of structural unemployment is minimumwage legislation, which holds wages above the productivity levels of less skilled workers, who are thus ill-suited toexisting jobs. In this scenario, the quantity of labor supplied will continue to exceed the quantity of labor demanded aslong as the minimum wage remains above the market equilibrium wage. The resulting surplus of labor creates a poolof unemployed workers—people who would like to work at the prevailing minimum wage, but who cannot find a job.5.If the minimum wage is $12.50, employers will attract more workers than they are willing to hire. In the absence ofprice controls, this causes employers to lower the wage until the quantity of labor supplied is equal to the quantitythey demand (this occurs at $10). That is, a surplus puts downward pressure on wages. If a minimum wage is setabove the market equilibrium wage, however, the market cannot reach equilibrium; thus the minimum wage isconsideredbinding.If the minimum wage were instead set at $9.50 and employers initially paid that wage, a shortage of workers willing tosupply labor would put upward pressure on wages. Because there is no ceiling on wages, the market would be able toreach equilibrium; therefore, a minimum wage of $9.50 isnotbinding.A binding minimum wage will contribute to a persistent surplus of labor in this market, generatingstructuralunemployment. Structural unemployment is unemployment that arises from a mismatch between the skills of theexisting labor force and those required to perform available jobs. One source of structural unemployment is minimumwage legislation, which holds wages above the productivity levels of less skilled workers, who are thus ill-suited toexisting jobs. In this scenario, the quantity of labor supplied will continue to exceed the quantity of labor demanded as

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Term
Spring
Professor
Petry
Tags
Unemployment, labor force

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