1. To what degree does the economy experience unemployment at full employment?

According to Investopedia (2020) “Full employment is an economic situation in which all

available labor resources are being used in the most efficient way possible”. Thus, full

employment is considered an ideal state because in an economy no single worker is unemployed.

However, in reality, this is extremely difficult to happen and every economy has the appearance

of unemployment. According to Tucker (2014), there are 3 types of unemployment: frictional,

structural, and cyclical. And Tucker also stated that "Full employment is the situation in which

an economy operates at an unemployment rate equal to the sum of the frictional and structural

surplus rates". Therefore "some economists may claim that surplus of less than 3% indicates “full

employment”- or at least very close” (Pettinger, 2019).

2. To what degree does minimum wage create unemployment?

According to Depersio (2020) “minimum wages can actually raise surplus by giving employers

less incentive to hire and more incentive to automate and outsource tasks that were previously

performed by low-wage employees. The authors of the new study - Paul Beaudry, David Green

and Ben Sand have stated that wage increases can negatively impact employment over a 10-year

period. If the wage increases by 1%, the employment rate tends to drop from 0.3% to 1%

depending on the increase in wages across the city or in just one industry. (Millsap, 2018). And

an example taken by A. & Millsap in their study shows that when the minimum wage in Seattle,

Los Angeles, and San Francisco goes up $ 15 per hour, Los Angeles employment rate falls by

three percentage points, Seattle downs two percentage points, and San Francisco downs one

percentage point over a long period of time.

Reference
Depersio, G. (2020, Nov 11). How Minimum Wages May Raise

Unemployment. Investopedia. https://www.investopedia.com/articles/investing/080515/minimu

m-wages-can-raise-unemployment.asp#:~:text=But%20according%20to%20leading

%20economists,performed%20by%20low%2Dwage%20employees.

Investopedia. (2020, Oct 20). Full

Employment. https://www.investopedia.com/terms/f/fullemployment.asp

Millsap, A. A. (2018, Sep 28). How Higher Minimum Wages Impact

Employment. Forbes. https://www.forbes.com/sites/adammillsap/2018/09/28/how-higher-

minimum-wages-impact-employment/?sh=75c448001e7d

Pettinger, T. (2019, Apr 24). Definition of Full

Employment. https://www.economicshelp.org/blog/453/unemployment/definition-of-full-

employment/

Tucker, I. B. (2014). Economics for Today. South - Western Cengage Learning.