In a perfectly competitive labor market, an increase in the minimum wage will always lead to higher employment levels as firms will hire more workers due to increased consumer spending.

In a perfectly competitive labor market, the idea that an increase in the minimum wage will always lead to higher employment levels is not accurate. When the minimum wage rises, firms may face higher costs for hiring workers. If these costs are too high, some businesses might reduce the number of employees or even lay off workers to maintain their profits. For example, if a restaurant has to pay its staff more, it might decide to cut back on the number of servers it employs. Therefore, while higher wages can encourage consumer spending, they can also lead to job losses if firms cannot afford to hire as many workers.