market. Before the passage of the living wage law, the equilibrium wage is $10 per hour and the city hires 1,200

workers at this wage. However, a group of concerned citizens persuades the city council to enact a living wage

law requiring employers to pay no less than $12 per hour. In response to the higher wage, 1,600 workers look

for jobs with the city. At this higher wage, the city, as an employer, is willing to hire only 700 workers. At the

price floor, the quantity supplied exceeds the quantity demanded, and a surplus of labor exists in this market.

For workers who continue to have a job at a higher salary, life has improved. For those who were willing to

work at the old wage rate but lost their jobs with the wage increase, life has not improved. Table 4.4 shows the

differences in supply and demand at different wages.

FIGURE 4.4 A Living Wage: Example of a Price Floor The original equilibrium in this labor market is a wage of $10/
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