Classical Model
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This graph of the classical labor market demonstrates what happens when the minimum wage floor is increased. We can see that when the floor is raised, the demand for labor drops. This causes labor to move from it's intial point at L1 to the lower employment at L2. This causes unemployment to rise, both because less people are being employed, and because the higher wage can draw people out of being discouraged workers. This model demonstrates the loss of employment that occures when a higher minimum wage is imposed.
