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Discuss how introducing a minimum wage may lead to unemployment.

Using a diagram, I would show demand and supply for labour, as well as a line for where the minimum wage is. This should show that the minimum wage is above the market wage.The diagram shows that with the wage rate now higher, more people wish to enter this job market whereas firms wish to hire less people as it’s more expensive to do so. This difference between how many people firms wish to employ and how many people are searching for jobs in this market shows the unemployment rate.Criticism of this method to show unemployment includes: many jobs are hard, if not impossible, to be replaced or assisted by robotics/technology (such as nursing, care workers, etc) making demand for labour highly or perfectly inelastic; higher wages mean workers have more money to spend, leading to more demand for goods and services, which would lead to higher employment and cancel out the effects of the increased wage; and minimum wage workers make up a small portion of workers making unemployment numbers small.



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