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suppose the equilibrium wage for unskilled workers in new jersey is $16 per hour. how will the wages and employment of unskilled workers in new jersey change if the state legislature raises the minimum wage from $8.85 per hour to $15 per hour?

User RyanM
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1 Answer

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Final answer:

The increase of New Jersey's minimum wage to $15, while below the equilibrium wage for unskilled workers, will result in higher wages for workers who were earning less than $15 but could also lead to reduced employment levels as employers adjust to the increased labor costs.

Step-by-step explanation:

When the state legislature raises the minimum wage from $8.85 to $15 per hour, assuming the equilibrium wage for unskilled workers in New Jersey is $16 per hour, the result will vary depending on whether the new minimum wage is binding. Since the new minimum wage of $15 is below the equilibrium wage, it may not lead to a large reduction in employment, as workers would already be earning a wage close to that amount. However, for employees who were earning less than $15, their wages will increase to meet this new minimum.

On the other hand, employers may reduce hiring new workers to adjust for the increased labor costs, leading to a decrease in employment levels for unskilled workers whose wages were previously below the new minimum. This could potentially create a surplus of workers willing to work at the minimum wage but unable to find employment. Overall, the increase in the minimum wage to $15 could lead to a mix of higher wages for some and reduced employment opportunities for others.

User Chucknor
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