Assume that a minimum wage law is passed that doesn't affect the market in high-wage Sector A but increases wages in Sector B, the covered sector, to $7 per hour, while reducing employment in Sector B to 20. Displaced workers in Sector B move into the uncovered Sector C, where wages fall to $4.50 per hour as employment increases to 30. Has wage inequality risen or fallen? Explain.

5. (20 points) Assume that the wage distribution for a small town is given in the table below: m # of Workers Wage Rate 25 $5 per hour 25 $5 per hour Assume that a minimum wage law is passed that doesn't affect the market in high-wage Sector A but increases wages in Sector B, the covered sector, to $7 per hour, while reducing employment in Sector B to 20. Displaced workers in Sector B move into the uncovered Sector C, where wages fall to $4.50 per hour as employment increases to 30. Has wage inequality risen or fallen? Explain