Equiring employers to pay a minimum wage rate of $11 per hour.

Consider the diagram below, which depicts the labor market in a city that has adopted a “living wage law” requiring employers to pay a minimum wage rate of $11 per hour. Answer the questions that follow.

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a. What condition exists in this city’s labor market at the present minimum wage of $11 per hour? How many people are unemployed at this wage?

b. A city councilwoman has proposed amending the living wage law. She suggests reducing the minimum wage to $9 per hour. Assuming that the labor demand and supply curves were to remain in their present positions, how many people would be unemployed at a new $9 minimum wage?

c. A councilman has offered a counterproposal. In his view, the current minimum wage is too low and should be increased to $12 per hour. Assuming that the labor demand and supply curves remain in their present positions, how many people would be unemployed at a new $12 minimum wage?

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