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What are the possible impacts of minimum wage legislation in the short-run and in the long run?
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Q2. What are the possible impacts of minimum wage legislation in the short-run and in the long run? Minimum wage is defined as "the lowest wage that can legally be paid to a particular group of workers" (Fischer, Dornbusch and Schmalensee, 1988, pg. 443). In my answer, I have to basically state the consequences of the government setting the lowest wage rate that has to be legally paid to a worker both in the short-run and in the long-run. The basic difference between the short-run and the long-run is that the former refers to a period of time during which some of a firm's inputs cannot be varied or in which a firm or household has not fully adapted to a price change whereas the latter is the exact opposite. I will begin answering the question using the labour market diagram in identifying the dis-equilibrium with minimum wage and then...
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