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what happens wages are set above the equilibrium level by law ?

**Understanding the Impact of Setting Wages Above Equilibrium**

In the dynamic world of economics, the concept of equilibrium wage plays a crucial role in understanding labor market dynamics. The equilibrium wage is the point where the supply of labor meets the demand, ensuring a balanced job market. However, when governments intervene by setting a minimum wage above this equilibrium level, the consequences can be significant and multifaceted.

### The Equilibrium Wage Explained

The equilibrium wage is determined by the intersection of labor supply and demand curves. At this point, the number of workers willing to work matches the number of jobs available, creating a balanced market. When the government imposes a minimum wage above this equilibrium, it disrupts this balance, leading to various economic outcomes.

### Consequences of Setting Wages Above Equilibrium

1. **Surplus of Labor and Unemployment**: When the minimum wage is set higher than the equilibrium, the supply of labor exceeds the demand. Employers, faced with higher labor costs, may reduce hiring, leading to a surplus of workers. This surplus translates into unemployment, as seen in examples where 200 out of 1,100 workers remain unemployed when the minimum wage is set above equilibrium.

2. **Impact on Productivity**: The increase in wages can disproportionately affect the least productive workers. Employers, aiming to cut costs, often target these workers first, leading to higher unemployment rates among less skilled or less efficient employees.

3. **Price Floor Dynamics**: Setting a minimum wage above equilibrium acts as a price floor. In economic terms, this leads to a surplus, as seen in goods markets. Translating this to labor, it results in a surplus of workers, unable to find employment at the mandated wage.

### Exceptions and Special Cases

While the general rule points to increased unemployment, there are exceptions. In monopsony labor markets, where a single employer dominates, a higher minimum wage can sometimes lead to increased employment. This occurs because the employer’s market power is reduced, allowing more workers to be hired at the higher wage. However, this scenario is rare and specific, not the norm.

### Broader Considerations

Beyond the immediate economic impacts, setting wages above equilibrium can influence consumer spending and business dynamics. While higher wages might increase spending, businesses may respond by reducing hiring or increasing prices, offsetting potential benefits.

### Conclusion

The decision to set wages above equilibrium is a complex issue with significant economic implications. While it can provide short-term benefits to some workers, it often leads to increased unemployment and economic inefficiencies. Understanding these dynamics helps policymakers navigate the delicate balance between protecting workers and maintaining a healthy labor market. As with many economic policies, the effects are nuanced, requiring careful consideration of both immediate and long-term impacts.