is equal to the quantity they demand (this occurs at $12). That is, a surplus puts downward pressure
on wages. If a minimum wage is set above the market equilibrium wage, however, the market cannot
reach equilibrium; thus the minimum wage is considered
If the minimum wage were instead set at $11.50 and employers initially paid that wage, a shortage of
workers willing to supply labor would put upward pressure on wages. Because there is no ceiling on
wages, the market would be able to reach equilibrium; therefore, a minimum wage of $11.50
A binding minimum wage will contribute to a persistent surplus of labor in this market,
. Structural unemployment is unemployment that arises from a
mismatch between the skills of the existing labor force and those required to perform available jobs.
One source of structural unemployment is minimum wage legislation, which holds wages above the
productivity levels of less skilled workers, who are thus ill-suited to existing jobs. In this scenario, the
quantity of labor supplied will continue to exceed the quantity of labor demanded as long as the
minimum wage remains above the market equilibrium wage. The resulting surplus of labor creates a
pool of unemployed workers—people who would like to work at the prevailing minimum wage, but who
cannot find a job.