Minimum Wages

Minimum Wage

A price floor for labor; it is illegal to pay workers less than this amount.

Price Floor

A minimum price set by the government that must be paid for a good or service, preventing prices from falling below a certain level.

Binding Minimum Wage

A minimum wage set above the equilibrium wage, leading to unemployment as labor supplied exceeds labor demanded.

Non-binding Minimum Wage

A minimum wage set below or at the equilibrium wage, resulting in no effect on employment or wages.

Monopsony

A market situation where there is only one buyer (employer) for a particular type of labor.

Marginal Cost of Labour

The additional cost to a firm of hiring one more worker; in monopsony, this cost exceeds the wage paid.

Elasticity of Labour Demand

A measure of how responsive the quantity of labor demanded is to a change in wages.

Empirical Evidence

Data collected through observation and experimentation to assess the effects of minimum wage legislation.

Disemployment Effects

Reductions in employment levels that may occur as a result of implementing minimum wage laws.

Differences in Differences Approach

A statistical method used to compare changes over time between a treatment group and a control group.