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

A price floor is a government-imposed minimum price at which a good or service can be sold. The intent of a price floor is to ensure that producers get a fair price for their products, and that consumers can afford essential goods and services. Price floors are often used to protect the incomes of farmers, workers, or other vulnerable groups in the economy.

A living wage is the minimum income necessary for a worker to meet their basic needs, including food, housing, healthcare, and other essentials for themselves and their family. A living wage is considered to be a more comprehensive measure of the income needed for a decent standard of living, compared to the minimum wage, which is typically based on a percentage of the median wage.

A living wage is considered a price floor because it sets a minimum wage level that must be paid by employers to their workers. This minimum wage level is determined by the cost of living and is intended to ensure that employees can afford basic necessities. When the government or a regulatory agency enforces a living wage, it prevents employers from paying wages below this level, effectively making it a price floor for labor.

Although both living wage and minimum wage policies are forms of price floors for labor, they may have different outcomes. A living wage policy is typically higher than a minimum wage policy, as it takes into account the actual cost of living. Thus, a living wage may provide workers with a better standard of living and help reduce income inequality. However, imposing a living wage, like minimum wage, can also lead to some adverse effects, such as increased unemployment if employers reduce their workforce to accommodate the higher wage costs, or inflation if higher wages are passed on as higher prices for goods and services. The specific outcomes of a living wage policy will depend on factors such as the labor market conditions, the magnitude of the wage increase, and the overall economic environment.