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Unemployment: Minimum Wage Laws and Efficiency Wages definitions

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  • Minimum Wage
    A legally set lowest hourly pay that employers must offer, often above market equilibrium, impacting job availability and worker earnings.
  • Price Floor
    A government-mandated minimum price for a good or service, preventing transactions below a certain level and affecting market outcomes.
  • Equilibrium Wage
    The pay rate where labor supply matches labor demand, ensuring all willing workers and employers can transact without surplus or shortage.
  • Labor Market
    The arena where employers seek workers and individuals offer their labor, with wages determined by supply and demand interactions.
  • Surplus of Labor
    A situation where more people want jobs than employers are willing to hire, often resulting from wages set above equilibrium.
  • Unemployment
    The condition where individuals seeking work cannot find jobs, frequently caused by excess labor supply or wage interventions.
  • Living Wage
    A pay level considered sufficient for workers to meet basic needs, often targeted by minimum wage policies to improve worker welfare.
  • Efficiency Wage
    A pay rate above market equilibrium, used by employers to boost worker productivity, reduce turnover, and attract higher-quality employees.
  • Worker Turnover
    The rate at which employees leave and are replaced, with lower turnover reducing training costs and improving organizational efficiency.
  • Worker Quality
    The skill and capability level of employees, enhanced when higher wages attract more applicants, allowing selective hiring.
  • Worker Effort
    The degree of diligence and performance shown by employees, often increased by incentives such as higher pay to avoid job loss.
  • Opportunity Cost
    The value of the next best alternative forgone, such as accepting lower pay if a higher-paying job is lost.
  • Quantity Demanded
    The number of workers employers are willing to hire at a given wage, decreasing as wages rise above equilibrium.
  • Quantity Supplied
    The number of individuals willing to work at a specific wage, increasing as wages rise, potentially leading to labor surplus.
  • Market Dynamics
    The forces and interactions that shape supply, demand, and prices in the labor market, influenced by policies and incentives.