If the government raises the minimum wage by 6%, the number of people employed falls by 2%. What is the elasticity of employment with respect to the minimum wage?

• Elasticity of employment is -0.33

Being less than 1 means demand is inelastic

Explanation:

Elasticity of employment determines the change in labor demand as result of change in wages.

Elasticity of employment = percentage change in labor demand percentage change in wage .

Percentage change in quantity of labor (employed) = -2%

Percentage change in minimum wage = 6%

Elasticity = -2% / 6% = -0.33