How does minimum wage laws affect efficiency, companies, and workers?

Price Ceilings occur when the government sets a minimum price that a market can charge. If such price is above the market equilibrium, then it is consider binding and affects efficiency, consumers and producers.

In the example below, if there was no minimum wage laws, companies would offer 21 million positions per year with wage of $4.00 per hour for particular job market (e.g., for cashiers).

In the example below, the government has added a minimum wage, meaning that companies are not allowed to offer an hourly wage below $5.00, while in the market equilibrium they would have offered $4.00. This is a binding price floor and affects the market and its participants. In this example, firms offer 20 million jobs per year (compared to 21 million in a free market above) at an hourly wage of $5.00. At a higher wage of $5.00, more workers are willing to work (22 million) compared to what is being supplied now by firms (20 million). Hence, there will be 2 million workers unemployed. In the prior example, there are 21 million workers employed at wage of $4.00 with zero worker unemployed, while during a minimum wage of $5.00, there are 20 million workers employed and 2 million unemployed. If you were an unemployed worker, would you welcome minimum wage law?

Source: Analystnotes

Furthermore, when there is a binding minimum wage, the firms’ surplus and workers’ decreases (compare these triangles to the free market graph). You would see that there this decrease of surplus results in: 1) potential loss from job search and deadweight loss.

• If you were less skilled or experienced and would be the first one to become an unemployed worker, would you advocate for minimum wage?
• If you were a firm’s manager or owner, would you advocate for minimum wage?
• If you were an economist, trying to get the optimal efficiency, would you advocate for minimum wage?