according to market forces above this price floor, but they would not be allowed to move beneath the floor. In

this situation, the price floor minimum wage is nonbinding—that is, the price floor is not determining the

market outcome. Even if the minimum wage moves just a little higher, it will still have no effect on the quantity

of employment in the economy, as long as it remains below the equilibrium wage. Even if the government

increases the minimum wage by enough so that it rises slightly above the equilibrium wage and becomes

binding, there will be only a small excess supply gap between the quantity demanded and quantity supplied.

These insights help to explain why U.S. minimum wage laws have historically had only a small impact on

employment. Since the minimum wage has typically been set close to the equilibrium wage for low-skill labor

and sometimes even below it, it has not had a large effect in creating an excess supply of labor. However, if the
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