Question

Why is a living wage considered a price floor? Does imposing a living wage have the same outcome as a

minimum wage?

Short answer

Since a living wage is a suggested minimum wage, it acts like a price floor.

Step-by-step solution

Minimum wage:

Minimum wages have been defined as “the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract”.

Step 2

Since a living wage is a suggested minimum wage, it acts like a price floor.

If the living wage is binding, it will cause an excess supply of labor at that wage rate.