Suppose the minimum wage in this economy is $8.70 per hour. An unemployed worker is defined as someone who is willing to work at the prevailing wage but is unable to find employment. Because the minimum wage lies above the equilibrium wage, it is binding, which means it is also the prevailing wage. If the wage is not allowed to fall below $8.70 per hour, the size of the unskilled labor force is workers are considered unemployed. The unemployment rate is defined as the percentage of unemployed workers in the labor force: workers, and unskilled 4
Suppose the minimum wage in this economy is $8.70 per hour. An unemployed worker is defined as someone who is willing to work at the prevailing wage but is unable to find employment. Because the minimum wage lies above the equilibrium wage, it is binding, which means it is also the prevailing wage. If the wage is not allowed to fall below $8.70 per hour, the size of the unskilled labor force is workers are considered unemployed. The unemployment rate is defined as the percentage of unemployed workers in the labor force: workers, and unskilled 4
Chapter10: Labor Markets And Income Distribution
Section: Chapter Questions
Problem 3SQP
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Transcribed Image Text:Suppose the minimum wage in this economy is $8.70 per hour. An unemployed worker is defined as someone who is willing to work at the prevailing
wage but is unable to find employment. Because the minimum wage lies above the equilibrium wage, it is binding, which means it is also the
prevailing wage.
If the wage is not allowed to fall below $8.70 per hour, the size of the unskilled labor force is
workers are considered unemployed.
The unemployment rate is defined as the percentage of unemployed workers in the labor force:
Unemployment Rate = Unemployed
Labor Force
x 100
At a minimum wage of $8.70 per hour, the unemployment rate among unskilled workers is approximately
workers, and
unskilled
4
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