For a national minimum wage to affect a labour market, it must be set

above the equilibrium wage. Below the equilibrium, firms are already paying more than the minimum.

What may a national minimum wage set above the equilibrium cause?

an excess supply of labour. More people want to work than firms want to employ.

It reduces poverty among low-paid workers. The lowest-paid workers earn more.

people who are unemployed. They have no wage, so the rise does not reach them.

by replacing some workers with machines. Machines become cheaper compared with labour.

In plain words

A government can set a floor under pay: the least that any employer may legally pay for an hour's work. This is the national minimum wage.

It is a minimum price, applied to labour, so the diagram and the argument are the same as for a minimum price in any market.

A national minimum wage is the lowest wage rate that employers are allowed by law to pay.
To have an effect it must be above the equilibrium wage. Then more people want to work (supply extends) and firms want fewer workers (demand contracts).
The gap between the supply of labour and the demand for labour at the minimum wage is unemployment.
Reasons for it: it raises the incomes of the lowest paid and reduces poverty, it prevents exploitation, and it gives people more reason to work than to live on benefits.
Arguments against it: it raises firms' costs, which may lead to fewer jobs or higher prices, and it does nothing for people who have no job.

At a minimum wage of $9 an hour, 5000 workers want jobs in an industry and firms want to employ 4300. How many are unemployed as a result?

Use the word "may". A minimum wage may cause unemployment: if firms can pay it out of profit, or if better-paid workers work harder, jobs need not be lost.
Draw it as a horizontal line above the equilibrium, and mark the excess supply of labour between the two curves.

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Cambridge IGCSE Economics 0455 · 8 marks · papermunch.org

Name ______________________________ Date ______________

Define a national minimum wage.[2]
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The lowest hourly wage rate that employers are legally allowed to pay their workers.
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Explain one advantage of introducing a national minimum wage.[3]
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It raises the pay of the lowest-paid workers, so their living standards rise and fewer people live in poverty.
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Explain why a rise in the national minimum wage might cause unemployment.[3]
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It raises firms' wage costs. The demand for labour contracts as firms cut jobs or use machines, while more people want to work at the higher wage, so there is an excess supply of labour.
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1. The lowest hourly wage rate that employers are legally allowed to pay their workers.
2. It raises the pay of the lowest-paid workers, so their living standards rise and fewer people live in poverty.
3. It raises firms' wage costs. The demand for labour contracts as firms cut jobs or use machines, while more people want to work at the higher wage, so there is an excess supply of labour.