The effects of a national minimum wage upon labour markets
A national minimum wage sets a legal floor on pay, forcing wages above the market rate. This changes how many workers employers hire and how many people want to work.
Formula
Labour Surplus = Qs − Qd (at minimum wage)
Real World
When the UK raised its National Living Wage to £11.44 in April 2024, hospitality businesses like Wetherspoons warned they would reduce staff hours and delay hiring to manage higher wage bills — illustrating the textbook prediction of a surplus of labour.
Exam Focus
Always draw a labelled diagram showing the wage floor above equilibrium, marking the resulting unemployment gap between Qs and Qd.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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