posted by Mickey on .
Suppose the minimum wage is above the equilibrium wage in the market for unskilled labor. Using a supply-and-demand diagram of the market for unskilled labor, show the market wage, the number of workers who are employed, and the number of workers who are unemployed. Also show the total wage payments to unskilled workers.
Draw supply and demand curves for unskilled labor. Y axis is the wage rate, X axis is quantity number of workers. Label on the Y axis the equilibrium wage, label on the X axis, the equilibrium quantity of workers.
(I would put hours worked on the X axis. But this is just a refinement, and does not change the basic analysis).
Now, draw a flat (horizontal) line above the equilibrium wage rate. Where this line crosses the demand curve, label this quantity as the number of employed workers. Where the line crosses the supply curve, this is the number who want to work and receive the minimum wage. The difference between these two quantities is the number of unemployed.
Total wage payments is wage*workers, represented by the box formed in your graph -- borders are x-axis, y-axis, wage horizontal line, number employed vertical line.