the minimum wage hike caused a significant decline in employment in New Jersey, and that employment may even grow. Model Reasoning for Efficient Markets The study shocked mainstream economics' claims about efficient markets at the time, and was the starting point of the minimum wage debate that followed for decades. In fact, there are two levels of confrontation here: first, economic theory vs. empirical research; second, efficient vs. inefficient markets. Since economic theory is often based on simpler assumptions about efficient markets, these two levels of confrontation are often combined: model reasoning for efficient markets vs. actual validation of inefficient markets. Traditional mainstream economics is deeply influenced by neoclassical economics and believes that the free market can achieve complete competitive efficiency and the government should not interfere.
The assumption of a perfectly competitive market is that both buyers and sellers in the market have complete information and are both recipients of the equilibrium price in the market, without any bargaining power. Under this assumption, the supply and demand sides will reach equilibrium price and quantity, and maximize efficiency. Any intervention sms services in price and quantity will only make the market deviate from efficiency. In terms of the labor market, "labor demand" reflects the market value that an employer can obtain for each additional worker hired by an employer; "labor supply" reflects the compensation required for each additional unit of labor provided by a worker. Under the assumption of a perfectly competitive market, the supply and demand sides agree to reach an equilibrium wage.
The equilibrium wage is equal to the labor value and the compensation required by the laborer at the same time, and the labor and the employer are mutually beneficial. However, if the government arbitrarily sets a minimum wage that is higher than the market wage, even if workers are willing to provide more labor services, because the minimum wage is higher than the labor value, employers cannot afford it, resulting in unemployment. Moreover, since the minimum wage usually affects only disadvantaged workers, neoclassical schools (such as the Chicago School represented by Milton Friedman) further infer that the minimum wage will cause disadvantaged workers to lose their jobs.