Suppose that the equilibrium wage for teachers in Wisconsin is $15/hour. Also suppose that Wisconsin raises its minimum wage to $14/hour. Because the equilibrium wage for teachers is (a) higher than the new minimum wage, we would expect the number of teachers employed to (b) stay the same at the new minimum wage. (c) There will be no change in the number of teachers.
An equilibrium wage is located at the point in which supply and demand for labor intersect. This means that employees are usually hired at to the point in which the extra cost of hiring an employee is equal to the sales revenue from selling their output. On the other hand, a minimum wage allows the government to manipulate the price floor below which workers may not sell their labor.
