What is the "Minimum Wage" in Italy?

What does minimum wage legislation do?

• Minimum wage legislation: a. sets a price ceiling above the market-clearing price. b. has no impact if the minimum wage is above the market-clearing price. c. has the same impact in all labor markets. d. creates unemployment when the minimum wage is above the equilibrium wage. e. is opposed by organized labor.

• Answer:

  d. Creates unemployment when the minimum wage is above the equilibrium wage. Applies to the theory of supply and demand. When companies are forced to pay more than the market's equilibrium wage, then the demand for labor is going to go down. Especially small companies cannot afford to pay high wages to workers, so the owner may do the work themselves or pile more responsibilities to other workers to reduce costs. Sid, I am not saying that I am anti minimum wage, but if you have studied economics whatsoever, you should be familiar with the law of supply and demand. If businesses have to pay more in wages, the demand for labor will decrease. In a free market system, an equilibrium price is set for wages, just as an equilibrium price is set for how much is charged for products and services. A business can only sell their product for what people are willing to pay for it. The cheaper the product, the higher the demand. The higher the price, the demand lowers. For example, there is a much higher demand for your typical family sedan vs a Mercedes. Wages are no different. In a market where there is no minimum wages, employers may try to hire people dirt cheap. Employees determine if they are willing to do that work for that cheap, and if not, then that employer is going to have a hard time finding anybody to work for them, so they have to pay more if they want employees, and even more if they want them to stick around. Competing businesses that pay more will attract employees. I would rather have low paying work than none at all. I understand the point of minimum wages and protecting people from being taken advantage of by employers. In the business world it happens. Another point is that businesses that are forced to pay wages above the equilibrium wage will try to cover those additional costs another way by raising the prices of their products or services or reducing labor. When the costs of products/services in the area go up, cost of living goes up, so you're really back at square one when that happens. I understand the point of minimum wages and it is trying to protect people from being taken advantage of and to set a minimal standard of living, but it is a double edged sword. There are pros and cons to it. This explanation is for the sake of argument when it comes to opinions on what minimum wage legislation does, but economics textbooks and courses will point you to the answer as D as far as coursework in economics is concerned. I don't know what educational background you bring to the table or if you have studied economics at all?