The Effectiveness of Minimum Wage Legislation

Running Head: Minimum Wage
The Effectiveness of Minimum Wage Legislation
By (Name)
(Tutor)
(University)
(Date)

Running Head: Minimum Wage 2
The Effectiveness of Minimum Wage Legislation
Question 1
Minimum wage is the price of labor below which employers are not allowed to compensate their
employees according to government’s regulation (Lewis, 2013). For a minimum wage to be
binding, it has to be fixed above the existing equilibrium wage.
Question 2
According to Fwc.gov.au (2018), per hour national minimum wage in Australia in 2018 is
$18.93. This accumulate to $719.20 per week with calculation based on 38 ordinary hours for a
week.
Question 3
Equilibrium wage is obtained when the demand for labour is equal to its supply
D = S
1,500,000 – 60,000W = 120,000W – 1,200,000
1,500,000 + 1,200,000 = 120,000W + 60,000W
2,700,000 = 180,000W
W = 2,700,000 / 180,000
W = 15
The equilibrium wage rate is thus $15per hour
Substituting $15 in either the demand or supply equation, we get the unskilled laborers.
D = 1,500,000 – 60,000W
D = 1,500,000 – (60,000 * 15)
D = 1,500,000 – 900,000
D = 600,000
The number of unskilled laborers is 600,000

Running Head: Minimum Wage 3
Question 4
In this case, we start by forming a schedule of demand and supply at different wage levels using
the given equations.
wage demand supply
0 1500000
-
1200000
5 1200000 -600000
10 900000 0
15 600000 600000
20 300000 1200000
25 0 1800000
Graph: demand and supply
0
5
10
15
20
25
30
-1500000 -1000000 -500000 0 500000 1000000 1500000 2000000
Wage Rate
Quantity
Demand and supply of Unskilled Labour
Demand
Supply