The Minimum Wage and a Tale of Two Islands

This is a fictional tale and has no connection to reality whatever.

Take two imaginary Pacific islands, long-neglected colonies of the US, with isolated economies.

Island A uses real US dollars for money and all of its wages fall between $8 and $16 per hour.

Island B also uses real US dollars for money and all of its wages fall between $3 and $6 per hour.

If Congress applies a new minimum wage of $7.25 per hour to both islands it should be obvious that Island A, with its higher standard of living, will not be affected and that Island B, with its lower standard of living will suffer massive unemployment.

Obvious, but an improper description. Why?

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