Question

Comparison of the minimum wage and the median wage can be used to estimate the extent to which unemployment results from minimum wage laws. All else equal, which scenario would result in the most unemployment?
A country where the minimum wage is set at 60% of the median wage.
0 A country where the minimum wage is set at 10% of the median wage.
0 A country where the minimum wage is set at 1% of the median wage.
A country where the minimum wage is set at 95% of the median wage.

Answer 1

Answer: A country where minimum wage is set at 1% of median wage.

Explanation:

The minimum wage is the lowest income that employers can pay their employees.

The median wage is the midpoint of wages earned by workers in the society. Workers who earn median wage implies that half of the workers in the economy earn more than them and the remaining half less than them.

From the portions given, unemployment will mostly occur in a country where minimum wage is set at 1% of the median age. For example let's assume the median age is $10 per hour in the United States. This implies that minimum wage will be $0.1. Nobody will really want to work for an amount which is so low which in turn, leads to great unemployment.