Why might politicians in a state or city enact a nonbinding minimum wage?

• A. To immediately increase the wages of all workers in the labor market
• B. To reduce the supply of labor in the market
• C. To ensure that all employers pay above the equilibrium wage
• D. To signal support for low-income workers without causing unemployment

Answer: (D)

Verified step by step guidance

1. Understand the concept of a nonbinding minimum wage: it is a minimum wage set below the current equilibrium wage, so it does not affect the actual wages paid in the market.
2. Recall that the equilibrium wage is where labor supply equals labor demand, meaning the market clears without surplus or shortage of labor.
3. Recognize that a nonbinding minimum wage does not change the wage level or employment because it is set below what employers are already paying.
4. Consider the political motivation: enacting a nonbinding minimum wage can signal support for low-income workers without causing negative side effects like unemployment.
5. Conclude that the purpose of a nonbinding minimum wage is symbolic or political, rather than to directly increase wages or reduce labor supply.