<p>As VCG stated, no government would impose a minimum wage below what is the countervailing equilibrium wage. To do so would be pointless.</p>

<p>Do remember that undergraduate discussions on minimum wages using the comparative statics (lines on graphs basically) model are erroneous because labour markets do not clear.</p>

CC BY-SA 3.0
2016-08-30T13:12:57.723Z
In what sense do labor markets not clear?
BKay
CC BY-SA 3.0
2016-08-31T23:25:46.413Z
Saying that was sloppy of me. I should have said in the short term labour markets do not clear because of nominal rigidities such as Bert not being able to move if his widget factory moves. or Bert being unable to renegotiate contracts instantaneously.
k BORT
CC BY-SA 3.0
2016-08-30T00:34:28.893Z
2016-08-30T00:34:28.893Z
k BORT
<p>I'm (very) new to economics, taking it as an introductory subject at the moment. I had a quick question regarding labour markets and minimum wages imposed as a form of government intervention.</p>

<p>Is it generally true that for most countries, the free market equilibrium outcome would result in a price below the price floor (hence there is a minimum wage?)</p>

<p>Sorry if this is a stupid question, but I just wanted to make sure.
Thanks!</p>

CC BY-SA 3.0
2016-08-24T12:19:11.390Z
Well almost by definition the minimum wage is a wage that the government forces the market to use so it would be pointless for them to set the wage if the market equilibrium was already above that. So when it first gets instituted, the minimum wage will bind, but other forces may lead to higher wages over time eventually leading to it not binding.
VCG
<minimum-wage>
Equilibrium in a labour market and price floors
zaddy
# Equilibrium in a labour market and price floors

(Asked by: username_0 on 2016-08-24)

I'm (very) new to economics, taking it as an introductory subject at the moment. I had a quick question regarding labour markets and minimum wages imposed as a form of government intervention.

Is it generally true that for most countries, the free market equilibrium outcome would result in a price below the price floor (hence there is a minimum wage?)

Sorry if this is a stupid question, but I just wanted to make sure.
Thanks!

**Tags:** minimum-wage
> **Comments:**
> **username_1**: Well almost by definition the minimum wage is a wage that the government forces the market to use so it would be pointless for them to set the wage if the market equilibrium was already above that. So when it first gets instituted, the minimum wage will bind, but other forces may lead to higher wages over time eventually leading to it not binding.  

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## 1 answers

### Answer by username_2 on 2016-08-30. Score: 1

As VCG stated, no government would impose a minimum wage below what is the countervailing equilibrium wage. To do so would be pointless.

Do remember that undergraduate discussions on minimum wages using the comparative statics (lines on graphs basically) model are erroneous because labour markets do not clear.

> **Comments:**
> **username_3**: In what sense do labor markets not clear?  
> **username_2**: Saying that was sloppy of me. I should have said in the short term labour markets do not clear because of nominal rigidities such as Bert not being able to move if his widget factory moves. or Bert being unable to renegotiate contracts instantaneously.  

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