Editing Minimum wage (section)

===Supply and demand model===
[[File:Wage labour 2.svg|thumb|Graph showing the basic [[supply and demand]] model of the minimum wage in the labor market]]
{{Main|Supply and demand}}

According to the supply and demand model of the labor market shown in many economics textbooks, increasing the minimum wage decreases the employment of minimum-wage workers.<ref name="Card&Krueger" /> One such textbook states:<ref name="Gwartney"/>
{{blockquote|
If a higher minimum wage increases the wage rates of unskilled workers above the level that would be established by market forces, the quantity of unskilled workers employed will fall. The minimum wage will price the services of the least productive (and therefore lowest-wage) workers out of the market. ... the direct results of minimum wage legislation are clearly mixed. Some workers, most likely those whose previous wages were closest to the minimum, will enjoy higher wages. Others, particularly those with the lowest prelegislation wage rates, will be unable to find work. They will be pushed into the ranks of the unemployed.}}

A firm's cost is an increasing function of the wage rate. The higher the wage rate, the fewer hours an employer will demand of employees. This is because, as the wage rate rises, it becomes more expensive for firms to hire workers and so firms hire fewer workers (or hire them for fewer hours). The [[Labour demand|demand of labor]] curve is therefore shown as a line moving down and to the right.<ref name="Ehren">Ehrenberg, R. and Smith, R. "Modern labor economics: theory and public policy", HarperCollins, 1994, 5th ed.{{page needed|date=December 2013}}</ref> Since higher wages increase the quantity supplied, the [[Labour supply|supply of labor]] curve is upward sloping, and is shown as a line moving up and to the right.<ref name="Ehren"/> If no minimum wage is in place, wages will adjust until the quantity of labor demanded is equal to quantity supplied, reaching [[economic equilibrium|equilibrium]], where the supply and demand curves intersect. Minimum wage behaves as a classical [[price floor]] on labor. Standard theory says that, if set above the equilibrium price, more labor will be willing to be provided by workers than will be demanded by employers, creating a [[Economic surplus|surplus]] of labor, i.e. unemployment.<ref name="Ehren" /> The economic model of markets predicts the same of other commodities (like milk and wheat, for example): Artificially raising the price of the commodity tends to cause an increase in quantity supplied and a decrease in quantity demanded. The result is a surplus of the commodity. When there is a wheat surplus, the government buys it. Since the government does not hire surplus labor, the labor surplus takes the form of unemployment, which tends to be higher with minimum wage laws than without them.<ref name="SowellBasic"/>

The supply and demand model implies that by mandating a price floor above the equilibrium wage, minimum wage laws will cause unemployment.<ref name="MB">{{cite book |last1=McConnell |first1=C. R. |first2=S. L. |last2=Brue |title=Economics |url=https://archive.org/details/microeconomicsst00camp |url-access=registration |publisher=Irwin-McGraw Hill |year=1999 |edition=14th |page=594 |isbn=9780072898385 }}</ref><ref name="GSSM">{{cite book |last1=Gwartney |first1=J. D. |first2=R. L. |last2=Stroup |first3=R. S. |last3=Sobel |first4=D. A. |last4=Macpherson |title=Economics: Private and Public Choice |url=https://archive.org/details/economics00gwar |url-access=registration |publisher=Thomson South-Western |year=2003 |edition=10th |page=[https://archive.org/details/economics00gwar/page/97 97] }}</ref> This is because a greater number of people are willing to work at the higher wage while a smaller number of jobs will be available at the higher wage. Companies can be more selective in those whom they employ thus the least skilled and least experienced will typically be excluded. An imposition or increase of a minimum wage will generally only affect employment in the low-skill labor market, as the equilibrium wage is already at or below the minimum wage, whereas in higher skill labor markets the equilibrium wage is too high for a change in minimum wage to affect employment.<ref name="M">{{cite book |last=Mankiw |first=N. Gregory |title=Principles of Macroeconomics |publisher=South-Western Pub |year=2011 |edition=6th |page=311 }}</ref>