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{{short description|lowest wage which can be paid legally in a state for working}}{{Use dmy dates|date=March 2019}}(File:Fight for $15 on 4-15 (17161520871).jpg|thumb|right|200px|Protesters call for an increased minimum wage as part of the "Fight for $15" effort to require a $15 per hour minimum wage in 2015.){{Labor|expanded=rights|sp=us}}A minimum wage is the lowest remuneration that employers can legally pay their workers—the price floor below which workers may not sell their labor. Most countries had introduced minimum wage legislation by the end of the 20th century.WEB,weblink ILO 2006: Minimum wages policy (PDF), Ilo.org,weblink" title="web.archive.org/web/20091229085643weblink">weblink 29 December 2009, live, 1 March 2012, Supply and demand models suggest that there may be welfare and employment losses from minimum wages. However, if the labor market is in a state of monopsony (with only one employer available who is hiring), minimum wages can increase the efficiency of the market. There is debate about the full effects of minimum wages.WEB,weblink $15 Minimum Wage, www.igmchicago.org, 2019-05-07, BOOK, Thomas C., Leonard, The Very Idea of Apply Economics: The Modern Minimum-Wage Controversy and Its Antecedents, Toward a History of Applied Economics, Roger E., Backhouse, Jeff, Biddle, Durham, Duke University Press, 978-0-8223-6485-6, 117–144, 2000,weblink BOOK, Gwartney, James David, J. R., Clark, Richard L., Stroup, 1985, Essentials of Economics, 405, Harcourt College Pub; 2 edition, New York, 978-0123110350,weblink The movement for minimum wages was first motivated as a way to stop the exploitation of workers in sweatshops, by employers who were thought to have unfair bargaining power over them. Over time, minimum wages came to be seen as a way to help lower-income families. Modern national laws enforcing compulsory union membership which prescribed minimum wages for their members were first passed in New Zealand and Australia in the 1890s.Although minimum wage laws are in effect in many jurisdictions, differences of opinion exist about the benefits and drawbacks of a minimum wage. Supporters of the minimum wage say it increases the standard of living of workers, reduces poverty, reduces inequality, and boosts morale.WEB,weblink Should We Raise The Minimum Wage?, 30 August 2017, The Perspective, 4 September 2017, In contrast, opponents of the minimum wage say it increases poverty, increases unemployment because some low-wage workers "will be unable to find work...[and] will be pushed into the ranks of the unemployed"NEWS,weblink The Young and the Jobless, 3 October 2009, The Wall Street Journal, 11 January 2014,weblink" title="web.archive.org/web/20140111120719weblink">weblink 11 January 2014, dead, BOOK, Oxford Dictionary of Economics, Black, John, 18 September 2003, Oxford University Press, 978-0-19-860767-0, 300, and is damaging to businesses, because excessively high minimum wages require businesses to raise the prices of their product or service to accommodate the extra expense of paying a higher wage.JOURNAL, Burkhauser, Richard, 30 September 2010, Minimum Wages. by David Neumark and William L. Wascher,weblink live, ILR Review, 64, 1,weblink" title="web.archive.org/web/20131009015807weblink">weblink 9 October 2013,

History

Modern minimum wage laws trace their origin to the Ordinance of Labourers (1349), which was a decree by King Edward III that set a maximum wage for laborers in medieval England.NEWS, Mihm, Stephen, How the Black Death Spawned the Minimum Wage,weblink 17 April 2014, Bloomberg View, 5 September 2013, live,weblink" title="web.archive.org/web/20140418234149weblink">weblink 18 April 2014, WEB,weblink Archived copy, 17 April 2014, live,weblink 19 April 2014, King Edward III, who was a wealthy landowner, was dependent, like his lords, on serfs to work the land. In the autumn of 1348, the Black Plague reached England and decimated the population.NEWSPAPER,weblink Black death was not spread by rat fleas, say researchers, Thorpe, Vanessa, 29 March 2014, The Guardian, 29 March 2014, live,weblink" title="web.archive.org/web/20140330010701weblink">weblink 30 March 2014, The severe shortage of labor caused wages to soar and encouraged King Edward III to set a wage ceiling. Subsequent amendments to the ordinance, such as the Statute of Labourers (1351), increased the penalties for paying a wage above the set rates.While the laws governing wages initially set a ceiling on compensation, they were eventually used to set a living wage. An amendment to the Statute of Labourers in 1389 effectively fixed wages to the price of food. As time passed, the Justice of the Peace, who was charged with setting the maximum wage, also began to set formal minimum wages. The practice was eventually formalized with the passage of the Act Fixing a Minimum Wage in 1604 by King James I for workers in the textile industry.By the early 19th century, the Statutes of Labourers was repealed as increasingly capitalistic England embraced laissez-faire policies which disfavored regulations of wages (whether upper or lower limits). The subsequent 19th century saw significant labor unrest affect many industrial nations. As trade unions were decriminalized during the century, attempts to control wages through collective agreement were made. However, this meant that a uniform minimum wage was not possible. In Principles of Political Economy in 1848, John Stuart Mill argued that because of the collective action problems that workers faced in organisation, it was a justified departure from laissez-faire policies (or freedom of contract) to regulate people's wages and hours by the law.It was not until the 1890s that the first modern legislative attempts to regulate minimum wages were seen in New Zealand and Australia. The movement for a minimum wage was initially focused on stopping sweatshop labor and controlling the proliferation of sweatshops in manufacturing industries.BOOK, Nordlund, Willis J., The quest for a living wage : the history of the federal minimum wage program, 1997, Greenwood Press, Westport, Conn., 9780313264122, xv,weblink The sweatshops employed large numbers of women and young workers, paying them what were considered to be substandard wages. The sweatshop owners were thought to have unfair bargaining power over their employees, and a minimum wage was proposed as a means to make them pay fairly. Over time, the focus changed to helping people, especially families, become more self-sufficient.BOOK, Neumark, David, William L. Wascher, Minimum Wages, The MIT Press, 2008, Cambridge, Massachusetts,weblink 978-0-262-14102-4, live,weblink 28 April 2016,

Minimum wage laws

File:Hourly Minimum Wages in Developed Economies, 2013.png|thumb|Hourly minimum wages in select developed economies in 2013. For a complete list of global wages see: List of minimum wages by countryList of minimum wages by countryThe first modern national minimum wages were enacted by the government recognition of unions which in turn established minimum wage policy among their members, as in New Zealand in 1894, followed by Australia in 1896 and the United Kingdom in 1909.BOOK, Starr, Gerald, Minimum wage fixing : an international review of practices and problems, 1993, International Labour Office, Geneva, 9789221025115, 1,weblink 2nd impression (with corrections), In the United States, statutory minimum wages were first introduced nationally in 1938,WEB, Grossman, Jonathan, Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage,weblink Department of Labor, 17 April 2014, live,weblink" title="web.archive.org/web/20140416113027weblink">weblink 16 April 2014, and they were reintroduced and expanded in the United Kingdom in 1998.NEWS, Stone, Jon, History of the UK's minimum wage,weblink 17 April 2014, Total Politics, 1 October 2010, dead,weblink" title="web.archive.org/web/20140114075901weblink">weblink 14 January 2014, There is now legislation or binding collective bargaining regarding minimum wage in more than 90 percent of all countries.JOURNAL, Williams, Walter E., June 2009, The Best Anti-Poverty Program We Have?, Regulation, 32, 2, 62,weblink In the European Union, 22 member states out of 28 currently have national minimum wages.WEB, Minimum wage statistics – Statistics Explained,weblink ec.europa.eu, 12 February 2016, live,weblink" title="web.archive.org/web/20160207085307weblink">weblink 7 February 2016, Other countries, such as Sweden, Finland, Denmark, Switzerland, Austria, and Italy, have no minimum wage laws, but rely on employer groups and trade unions to set minimum earnings through collective bargaining.Ehrenberg, Ronald G. Labor Markets and Integrating National Economies, Brookings Institution Press (1994), p. 41NEWS, Alderman, Liz, Greenhouse, Steven, Fast Food in Denmark Serves Something Atypical: Living Wages,weblink 27 October 2014, The New York Times, 27 October 2014, live,weblink" title="web.archive.org/web/20141028002802weblink">weblink 28 October 2014, Minimum wage rates vary greatly across many different jurisdictions, not only in setting a particular amount of money—for example $7.25 per hour ($14,500 per year) under certain US state laws (or $2.13 for employees who receive tips, which is known as the tipped minimum wage), $11.00 in the US state of Washington,WEB, Minimum Wage,weblink Washington State Dept. of Labor & Industries, 18 January 2015, live,weblink" title="web.archive.org/web/20150112020816weblink">weblink 12 January 2015, or £7.83 (for those aged 25+) in the United KingdomWEB,weblink National Minimum Wage 2018, 24 May 2018, —but also in terms of which pay period (for example Russia and China set monthly minimum wages) or the scope of coverage. Currently the United States federal minimum wage is $7.25 per hour. However, some states do not recognize the minimum wage law, such as Louisiana and Tennessee."Wage and Hour Division" United States Department of Labor. January 2016. Website. 13 July 2016. Other states operate below the federal minimum wage such as Georgia and Wyoming. Some jurisdictions allow employers to count tips given to their workers as credit towards the minimum wage levels. India was one of the first developing countries to introduce minimum wage policy in its law in 1948. However, it is rarely implemented, even by contractors of government agencies. In Mumbai, as of 2017, the minimum wage was Rs. 348/day.WEB, Interview with Mr. Milind Ranade (Kachra Vahtuk Shramik Sangh Mumbai),weblink TISS Wastelines official website, Tata Institute of Social Sciences, 20 March 2019, India also has one of the most complicated systems with more than 1,200 minimum wage rates depending on the geographical region.WEB,weblink Most Asked Questions about Minimum Wages in India, PayCheck.in, 22 February 2013, 29 March 2013, live,weblink" title="web.archive.org/web/20130403124424weblink">weblink 3 April 2013,

Informal minimum wages

Customs and extra-legal pressures from governments or labor unions can produce a de facto minimum wage. So can international public opinion, by pressuring multinational companies to pay Third World workers wages usually found in more industrialized countries. The latter situation in Southeast Asia and Latin America was publicized in the 2000s, but it existed with companies in West Africa in the middle of the 20th century.BOOK, Sowell, Thomas, Thomas Sowell, 2004, Minimum Wage Laws,weblink 163–69, Basic Economics: A Citizen's Guide to the Economy, Basic Books, New York, 978-0-465-08145-5,

Setting minimum wage

Among the indicators that might be used to establish an initial minimum wage rate are ones that minimize the loss of jobs while preserving international competitiveness.Provisional Minimum Wage Commission: Preliminary Views on a Bask of Indicators, Other Relevant Considerations and Impact Assessment, Provisional Minimum Wage Commission, Hong Kong Special Administrative Region Government, WEB,weblink Archived copy, 19 February 2012, dead,weblink" title="web.archive.org/web/20120119120419weblink">weblink 19 January 2012, Among these are general economic conditions as measured by real and nominal gross domestic product; inflation; labor supply and demand; wage levels, distribution and differentials; employment terms; productivity growth; labor costs; business operating costs; the number and trend of bankruptcies; economic freedom rankings; standards of living and the prevailing average wage rate.In the business sector, concerns include the expected increased cost of doing business, threats to profitability, rising levels of unemployment (and subsequent higher government expenditure on welfare benefits raising tax rates), and the possible knock-on effects to the wages of more experienced workers who might already be earning the new statutory minimum wage, or slightly more.Setting the Initial Statutory Minimum Wage Rate, submission to government by the Hong Kong General Chamber of Commerce. Among workers and their representatives, political considerations weigh in as labor leaders seek to win support by demanding the highest possible rate.Li, Joseph, "Minimum wage legislation for all sectors," China Daily 16 October 2008 WEB,weblink Minimum wage legislation for all sectors, 19 February 2012, live,weblink" title="web.archive.org/web/20110503235232weblink">weblink 3 May 2011, Other concerns include purchasing power, inflation indexing and standardized working hours.In the United States, the minimum wage have been set under the Fair Labor Standards Act of 1938. According to the Economic Policy Institute, the minimum wage in the United States would have been $18.28 in 2013 if the minimum wage had kept pace with labor productivity.NEWS, Editorial Board, The Case for a Higher Minimum Wage,weblink 9 February 2014, The New York Times, 9 February 2014, live,weblink" title="web.archive.org/web/20140209175346weblink">weblink 9 February 2014, To adjust for increased rates of worker productivity in the United States, raising the minimum wage to $22 (or more) an hour has been presented.NEWS, Chumley, Cheryl K., Take it to the bank: Sen. Elizabeth Warren wants to raise minimum wage to $22 per hour,weblink 18 March 2013, Washington Times, 22 January 2014, live,weblink" title="web.archive.org/web/20140223105549weblink">weblink 23 February 2014, NEWS, Wing, Nick, Elizabeth Warren: Minimum Wage Would Be $22 An Hour If It Had Kept Up With Productivity,weblink 18 March 2013, Huffington Post, 22 January 2014, live,weblink" title="web.archive.org/web/20140203054615weblink">weblink 3 February 2014, WEB, Hart-Landsberg, Ph.D., Martin, $22.62/HR: The Minimum Wage If It Had Risen Like The Incomes Of The 1%,weblink 19 December 2013, thesocietypages.org, 22 January 2014, live,weblink" title="web.archive.org/web/20140116214353weblink">weblink 16 January 2014, WEB, Rmusemore, Stop Complaining Republicans, the Minimum Wage Should be $22.62 an Hour,weblink 3 December 2013, policususa.com, 22 January 2014, live,weblink" title="web.archive.org/web/20131204111136weblink">weblink 4 December 2013,

Economic models

{{See also|Labour economics}}

Supply and demand model

File:Wage labour 2.svg|thumb|Graph showing the basic supply and demandsupply and demandAccording to the supply and demand model of the labor market shown in many economics textbooks, increasing the minimum wage decreases the employment of minimum-wage workers. One such textbook states:A firm's cost is an increasing function of the wage rate. The higher the wage rate, the fewer hours an employer will demand of employees. This is because, as the wage rate rises, it becomes more expensive for firms to hire workers and so firms hire fewer workers (or hire them for fewer hours). The demand of labor curve is therefore shown as a line moving down and to the right.Ehrenberg, R. and Smith, R. "Modern labor economics: theory and public policy", HarperCollins, 1994, 5th ed.{{page needed|date=December 2013}} Since higher wages increase the quantity supplied, the supply of labor curve is upward sloping, and is shown as a line moving up and to the right. If no minimum wage is in place, wages will adjust until quantity of labor demanded is equal to quantity supplied, reaching equilibrium, where the supply and demand curves intersect. Minimum wage behaves as a classical price floor on labor. Standard theory says that, if set above the equilibrium price, more labor will be willing to be provided by workers than will be demanded by employers, creating a surplus of labor, i.e. unemployment. The economic model of markets predicts the same of other commodities (like milk and wheat, for example): Artificially raising the price of the commodity tends to cause an increase in quantity supplied and a decrease in quantity demanded. The result is a surplus of the commodity. When there is a wheat surplus, the government buys it. Since the government does not hire surplus labor, the labor surplus takes the form of unemployment, which tends to be higher with minimum wage laws than without them.The supply and demand model implies that by mandating a price floor above the equilibrium wage, minimum wage laws will cause unemployment.BOOK, McConnell, C. R., S. L., Brue, Economics, Irwin-McGraw Hill, 1999, 14th, 594, BOOK, Gwartney, J. D., R. L., Stroup, R. S., Sobel, D. A., Macpherson, Economics: Private and Public Choice, Thomson South-Western, 2003, 10th, 97, This is because a greater number of people are willing to work at the higher wage while a smaller number of jobs will be available at the higher wage. Companies can be more selective in those whom they employ thus the least skilled and least experienced will typically be excluded. An imposition or increase of a minimum wage will generally only affect employment in the low-skill labor market, as the equilibrium wage is already at or below the minimum wage, whereas in higher skill labor markets the equilibrium wage is too high for a change in minimum wage to affect employment.BOOK, Mankiw, N. Gregory, Principles of Macroeconomics, South-Western Pub, 2011, 6th, 311,

Monopsony

File:Monopsony3.png|thumb|Modern economics suggests that a moderate minimum wage may increase employment as labor markets are monopsonistic and workers lack bargaining power.]]The supply and demand model predicts that raising the minimum wage helps workers whose wages are raised, and hurts people who are not hired (or lose their jobs) when companies cut back on employment. But proponents of the minimum wage hold that the situation is much more complicated than the model can account for. One complicating factor is possible monopsony in the labor market, whereby the individual employer has some market power in determining wages paid. Thus it is at least theoretically possible that the minimum wage may boost employment. Though single employer market power is unlikely to exist in most labor markets in the sense of the traditional 'company town,' asymmetric information, imperfect mobility, and the personal element of the labor transaction give some degree of wage-setting power to most firms.JOURNAL, William M., Boal, Michael R, Ransom, March 1997, Monopsony in the Labor Market, Journal of Economic Literature, 35, 1, 86–112, 2729694, Modern economic theory predicts that although an excessive minimum wage may raise unemployment as it fixes a price above most demand for labor, a minimum wage at a more reasonable level can increase employment, and enhance growth and efficiency. This is because labor markets are monopsonistic and workers persistently lack bargaining power. When poorer workers have more to spend it stimulates effective aggregate demand for goods and services.e.g. DE Card and AB Krueger, Myth and Measurement: The New Economics of the Minimum Wage (1995) and S Machin and A Manning, ‘Minimum wages and economic outcomes in Europe’ (1997) 41 European Economic Review 733BOOK, Rittenberg, Timothy Tregarthen, Libby, Economics, 1999, Worth Publishers, New York, 9781572594180, 290, 2nd,weblink 21 June 2014,

Criticisms of the supply and demand model

The argument that a minimum wage decreases employment is based on a simple supply and demand model of the labor market. A number of economists (for example Pierangelo Garegnani,JOURNAL, P., Garegnani, Heterogeneous Capital, the Production Function and the Theory of Distribution, The Review of Economic Studies, 37, 3, July 1970, 407–36, 2296729, 10.2307/2296729, Robert L. Vienneau,JOURNAL, 10.1111/j.1467-9957.2005.00467.x, On Labour Demand and Equilibria of the Firm, 2005, Vienneau, Robert L., The Manchester School, 73, 5, 612–19, and Arrigo Opocher & Ian SteedmanJOURNAL, 10.1093/cje/bep005, Input price-input quantity relations and the numeraire, 2009, Opocher, A., Steedman, I., Cambridge Journal of Economics, 33, 5, 937–48, ), building on the work of Piero Sraffa, argue that that model, even given all its assumptions, is logically incoherent. Michael Anyadike-Danes and Wynne GodleyJOURNAL, 10.1111/j.1467-9957.1989.tb00809.x, Real Wages and Employment: A Sceptical View of Some Recent Empirical Work, 1989, Anyadike-Danes, Michael, Godley, Wynne, The Manchester School, 57, 2, 172–87, argue, based on simulation results, that little of the empirical work done with the textbook model constitutes a potentially falsifiable theory, and consequently empirical evidence hardly exists for that model. Graham WhiteJOURNAL, Graham, White, The Poverty of Conventional Economic Wisdom and the Search for Alternative Economic and Social Policies, The Drawing Board: An Australian Review of Public Affairs, 2, 2, November 2001, 67–87,weblink live,weblink" title="web.archive.org/web/20130524091537weblink">weblink 24 May 2013, argues, partially on the basis of Sraffianism, that the policy of increased labor market flexibility, including the reduction of minimum wages, does not have an "intellectually coherent" argument in economic theory.File:Minimum to Average Wage for OECD Countries.png|thumb|Minimum wage levels in OECDOECDGary Fields, Professor of Labor Economics and Economics at Cornell University, argues that the standard textbook model for the minimum wage is ambiguous, and that the standard theoretical arguments incorrectly measure only a one-sector market. Fields says a two-sector market, where "the self-employed, service workers, and farm workers are typically excluded from minimum-wage coverage... [and with] one sector with minimum-wage coverage and the other without it [and possible mobility between the two]," is the basis for better analysis. Through this model, Fields shows the typical theoretical argument to be ambiguous and says "the predictions derived from the textbook model definitely do not carry over to the two-sector case. Therefore, since a non-covered sector exists nearly everywhere, the predictions of the textbook model simply cannot be relied on."JOURNAL, 10.1108/01437729410059323, The Unemployment Effects of Minimum Wages, 1994, Fields, Gary S., International Journal of Manpower, 15, 2, 74–81,weblink An alternate view of the labor market has low-wage labor markets characterized as monopsonistic competition wherein buyers (employers) have significantly more market power than do sellers (workers). This monopsony could be a result of intentional collusion between employers, or naturalistic factors such as segmented markets, search costs, information costs, imperfect mobility and the personal element of labor markets.{{citation needed|date=October 2016}} In such a case a simple supply and demand graph would not yield the quantity of labor clearing and the wage rate. This is because while the upward sloping aggregate labor supply would remain unchanged, instead of using the upward labor supply curve shown in a supply and demand diagram, monopsonistic employers would use a steeper upward sloping curve corresponding to marginal expenditures to yield the intersection with the supply curve resulting in a wage rate lower than would be the case under competition. Also, the amount of labor sold would also be lower than the competitive optimal allocation.Such a case is a type of market failure and results in workers being paid less than their marginal value. Under the monopsonistic assumption, an appropriately set minimum wage could increase both wages and employment, with the optimal level being equal to the marginal product of labor.BOOK, Monopsony in motion: Imperfect Competition in Labor Markets, Manning, Alan, 2003, Princeton University Press, Princeton, NJ, 978-0-691-11312-8, {{page needed|date=December 2013}} This view emphasizes the role of minimum wages as a market regulation policy akin to antitrust policies, as opposed to an illusory "free lunch" for low-wage workers.Another reason minimum wage may not affect employment in certain industries is that the demand for the product the employees produce is highly inelastic.BOOK, Gillespie, Andrew, Foundations of Economics, 240, Oxford University Press, 2007, For example, if management is forced to increase wages, management can pass on the increase in wage to consumers in the form of higher prices. Since demand for the product is highly inelastic, consumers continue to buy the product at the higher price and so the manager is not forced to lay off workers. Economist Paul Krugman argues this explanation neglects to explain why the firm was not charging this higher price absent the minimum wage.BOOK, Krugman, Paul, Economics, 385, Worth Publishers, 2013, Three other possible reasons minimum wages do not affect employment were suggested by Alan Blinder: higher wages may reduce turnover, and hence training costs; raising the minimum wage may "render moot" the potential problem of recruiting workers at a higher wage than current workers; and minimum wage workers might represent such a small proportion of a business's cost that the increase is too small to matter. He admits that he does not know if these are correct, but argues that "the list demonstrates that one can accept the new empirical findings and still be a card-carrying economist."NEWS, Alan S., Blinder, The $5.15 Question, The New York Times, 23 May 1996, A29,weblink live,weblink" title="web.archive.org/web/20170701015950weblink">weblink 1 July 2017,

Mathematical models of the minimum wage and frictional labor markets

The following mathematical models are more quantitative in orientation, and highlight some of the difficulties in determining the impact of the minimum wage on labor market outcomes.BOOK,weblink Labor Economics, Cahuc, Pierre, Carcillo, Stéphane, Zylberberg, André, The MIT Press, 2014, 9780262027700, 2nd, Cambridge, MA, 796–799, Specifically, these models focus on labor markets with frictions.

Welfare and labor market participation

Assume that the decision to participate in the labor market results from a trade-off between being an unemployed job seeker and not participating at all. All individuals whose expected utility outside the labor market is less than the expected utility of an unemployed person V_{u} decide to participate in the labor market. In the basic search and matching model, the expected utility of unemployed persons V_{u} and that of employed persons V_{e} are defined by:begin{aligned}rV_{e} &= w + q(V_{u}-V_{e}) rV_{u} &= z + theta m(theta) (V_{e}-V_{u})end{aligned}Let w be the wage, r the interest rate, z the instantaneous income of unemployed persons, q the exogenous job destruction rate, theta the labor market tightness, and theta m(theta) the job finding rate. The profits Pi_{e} and Pi_{v} expected from a filled job and a vacant one are:rPi_{e} = y-w+q(Pi_{v}-Pi_{e}), quad rPi_{v} = -h + m(theta)(Pi_{e}-Pi_{v})where h is the cost of a vacant job and y is the productivity. When the free entry condition Pi_{v} = 0 is satisfied, these two equalities yield the following relationship between the wage w and labor market tightness theta:{hover{m(theta)}} = {y-wover{r+q}}If w represents a minimum wage that applies to all workers, this equation completely determines the equilibrium value of the labor market tightness theta. There are two conditions associated with the matching function:m'(theta) < 0, quad [theta m(theta)]' > 0This implies that theta is a decreasing function of the minimum wage w, and so is the job finding rate alpha = theta m(theta). A hike in the minimum wage degrades the profitability of a job, so firms post fewer vacancies and the job finding rate falls off. Now let's rewrite rV_{u} to be:rV_{u} = {(r+q)z + theta m(theta) wover{r+q + theta m(theta)}}Using the relationship between the wage and labor market tightness to eliminate the wage from the last equation gives us:rV_{u} = {theta m(theta)y + (r+q)z - theta(r+q)hover{r+q + theta m(theta)}}If we maximize rV_{u} in this equation, with respect to the labor market tightness, we find that:{[1-eta(theta)](y-z)over{r+q+eta(theta)theta m(theta)}} = {hover{m(theta)}}where eta(theta) is the elasticity of the matching function:eta(theta) = -theta{m'(theta)over{m(theta)}} equiv -theta {dover{dtheta}}log m(theta)This result shows that the expected utility of unemployed workers is maximized when the minimum wage is set at a level that corresponds to the wage level of the decentralized economy in which the bargaining power parameter is equal to the elasticity eta(theta).  The level of the negotiated wage is w^{*}.If w < w^{*}, then an increase in the minimum wage increases participation and the unemployment rate, with an ambiguous impact on employment. When the bargaining power of workers is less than eta(theta), an increases in the minimum wage improves the welfare of the unemployed - this suggests that minimum wage hikes can improve labor market efficiency, at least up to the point when bargaining power equals eta(theta). On the other hand, if w geq w^{*}, any increases in the minimum wage entails a decline in labor market participation and an increase in unemployment.

Job search effort

In the model just presented, we found that the minimum wage always increases unemployment. This result does not necessarily hold when the search effort of workers in endogenous.Consider a model where the intensity of the job search is designated by the scalar epsilon, which can be interpreted as the amount of time and/or intensity of the effort devoted to search. Assume that the arrival rate of job offers is alphaepsilon and that the wage distribution is degenerated to a single wage w. Denote varphi(epsilon) to be the cost arising from the search effort, with varphi' > 0, ; varphi'' > 0. Then the discounted utilities are given by:begin{aligned}rV_{e} &= w + q(V_{u}-V_{e}) rV_{u} &= max_{epsilon} ; z - varphi(epsilon) + alpha epsilon(V_{e}-V_{u})end{aligned}Therefore, the optimal search effort is such that the marginal cost of performing the search is equation to the marginal return:varphi'(epsilon) = alpha(V_{e}-V_{u})This implies that the optimal search effort increases as the difference between the expected utility of the job holder and the expected utility of the job seeker grows. In fact, this difference actually grows with the wage. To see this, take the difference of the two discounted utilities to find:(r+q)(V_{e}-V_{u}) = w-max_{epsilon}left[z - varphi(epsilon) + alpha epsilon(V_{e}-V_{u}) right]Then differentiating with respect to w and rearranging gives us:{dover{dw}}(V_{e}-V_{u}) = {1over{r+q+alphaepsilon^{*}}} > 0where epsilon^{*} is the optimal search effort. This implies that a wage increase drives up job search effort and, therefore, the job finding rate. Additionally, the unemployment rate u at equilibrium is given by:u = {qover{q+alphaepsilon}}A hike in the wage, which increases the search effort and the job finding rate, decreases the unemployment rate. So it is possible that a hike in the minimum wage may, by boosting the search effort of job seekers, boost employment. Taken in sum with the previous section, the minimum wage in labor markets with frictions can improve employment and decrease the unemployment rate when it is sufficiently low. However, a high minimum wage is detrimental to employment and increases the unemployment rate.

Empirical studies

(File:Funnel Graph of Estimated Minimum Wage Effects.jpg|thumb|Estimated minimum wage effects on employment from a meta-study of 64 other studies showed insignificant employment effect (both practically and statistically) from minimum-wage raises. The most precise estimates were heavily clustered at or near zero employment effects (elasticity = 0).WEB,weblink Why Does the Minimum Wage Have No Discernible Effect on Employment?, February 2013, John, Schmitt, Center for Economic and Policy Research,weblink The Washington Post, 14 February 2013, 5 December 2013, live,weblink" title="web.archive.org/web/20131203232557weblink">weblink 3 December 2013, )Economists disagree as to the measurable impact of minimum wages in practice. This disagreement usually takes the form of competing empirical tests of the elasticities of supply and demand in labor markets and the degree to which markets differ from the efficiency that models of perfect competition predict.Economists have done empirical studies on different aspects of the minimum wage, including:
  • Employment effects, the most frequently studied aspect
  • Effects on the distribution of wages and earnings among low-paid and higher-paid workers
  • Effects on the distribution of incomes among low-income and higher-income families
  • Effects on the skills of workers through job training and the deferring of work to acquire education
  • Effects on prices and profits
  • Effects on on-the-job training
Until the mid-1990s, a general consensus existed among economists, both conservative and liberal, that the minimum wage reduced employment, especially among younger and low-skill workers.BOOK, David, Card, Alan B., Krueger, Myth and Measurement: The New Economics of the Minimum Wage, Princeton University Press, 1995, 1, 6–7, In addition to the basic supply-demand intuition, there were a number of empirical studies that supported this view. For example, Gramlich (1976) found that many of the benefits went to higher income families, and that teenagers were made worse off by the unemployment associated with the minimum wage.JOURNAL, Gramlich, Edward M., 1976, Impact of Minimum Wages on Other Wages, Employment, and Family Incomes,weblink Brookings Papers on Economic Activity, 1976, 2, 409–61, 10.2307/2534380, Flanagan, Robert J., Wachter, Michael L., 2534380, Brown et al. (1983) noted that time series studies to that point had found that for a 10 percent increase in the minimum wage, there was a decrease in teenage employment of 1–3 percent. However, the studies found wider variation, from 0 to over 3 percent, in their estimates for the effect on teenage unemployment (teenagers without a job and looking for one). In contrast to the simple supply and demand diagram, it was commonly found that teenagers withdrew from the labor force in response to the minimum wage, which produced the possibility of equal reductions in the supply as well as the demand for labor at a higher minimum wage and hence no impact on the unemployment rate. Using a variety of specifications of the employment and unemployment equations (using ordinary least squares vs. generalized least squares regression procedures, and linear vs. logarithmic specifications), they found that a 10 percent increase in the minimum wage caused a 1 percent decrease in teenage employment, and no change in the teenage unemployment rate. The study also found a small, but statistically significant, increase in unemployment for adults aged 20–24.JOURNAL, Charles, Brown, Curtis, Gilroy, Andrew, Kohen, Time-Series Evidence of the Effect of the Minimum Wage on Youth Employment and Unemployment, The Journal of Human Resources, 18, 1, Winter 1983, 3–31, 145654, 10.2307/145654,weblink (File:CBO Projected Effects of Minimum Wage Increases v1.png|thumb|right|CBO table illustrating projections of the effects of minimum wage increases on employment and income, under two scenarios)Wellington (1991) updated Brown et al.'s research with data through 1986 to provide new estimates encompassing a period when the real (i.e., inflation-adjusted) value of the minimum wage was declining, because it had not increased since 1981. She found that a 10% increase in the minimum wage decreased the absolute teenage employment by 0.6%, with no effect on the teen or young adult unemployment rates.JOURNAL, Alison J., Wellington, Effects of the Minimum Wage on the Employment Status of Youths: An Update, The Journal of Human Resources, 26, 1, Winter 1991, 27–46, 145715, 10.2307/145715, Some research suggests that the unemployment effects of small minimum wage increases are dominated by other factors.WEB,weblink Minimum wage trends: Understanding past and contemporary research, Economic Policy Institute, 24 October 2006, 6 December 2013, Liana, Fox, live,weblink" title="web.archive.org/web/20081216010154weblink">weblink 16 December 2008, In Florida, where voters approved an increase in 2004, a follow-up comprehensive study after the increase confirmed a strong economy with increased employment above previous years in Florida and better than in the US as a whole.WEB,weblink The Florida Minimum Wage: Good for Workers, Good for the Economy, 3 November 2013, dead,weblink" title="web.archive.org/web/20130622155415weblink">weblink 22 June 2013, When it comes to on-the-job training, some believe the increase in wages is taken out of training expenses. A 2001 empirical study found that there is "no evidence that minimum wages reduce training, and little evidence that they tend to increase training."JOURNAL, Daron, Acemoglu, Jörn-Steffen, Pischke,weblink Minimum Wages and On-the-Job Training, Institute for the Study of Labor, November 2001, 6 December 2013, 288292, live,weblink" title="web.archive.org/web/20170525162850weblink">weblink 25 May 2017, Also published as BOOK, 10.1016/S0147-9121(03)22005-7, Minimum Wages and On-the-job Training, Worker Well-Being and Public Policy, Research in Labor Economics, 2003, Acemoglu, Daron, Pischke, Jörn-Steffen, 978-0-76231-026-5, 22, 159–202, Solomon W., Polachek, 1721.1/63851,weblink Some empirical studies have tried to ascertain the benefits of a minimum wage beyond employment effects. In an analysis of census data, Joseph Sabia and Robert Nielson found no statistically significant evidence that minimum wage increases helped reduce financial, housing, health, or food insecurity.BOOK,weblink Joseph J., Sabia, Robert B., Nielsen, 2012, Can Raising the Minimum Wage Reduce Poverty and Hardship?, Employment Policies Institute, 4, live,weblink 8 January 2017, This study was undertaken by the Employment Policies Institute, a think tank funded by the food, beverage and hospitality industries. In 2012, Michael Reich published an economic analysis that suggested that a proposed minimum wage hike in San Diego might stimulate the city's economy by about $190 million.WEB,weblink Increasing the Minimum Wage in San Jose: Benefits and Costs- White Paper, Michael Reich, 29 March 2013, live,weblink" title="web.archive.org/web/20130404085118weblink">weblink 4 April 2013, The Economist wrote in December 2013: "A minimum wage, providing it is not set too high, could thus boost pay with no ill effects on jobs....America's federal minimum wage, at 38% of median income, is one of the rich world's lowest. Some studies find no harm to employment from federal or state minimum wages, others see a small one, but none finds any serious damage. ... High minimum wages, however, particularly in rigid labour markets, do appear to hit employment. France has the rich world’s highest wage floor, at more than 60% of the median for adults and a far bigger fraction of the typical wage for the young. This helps explain why France also has shockingly high rates of youth unemployment: 26% for 15- to 24-year-olds."JOURNAL,weblink The logical floor, The Economist, 14 December 2013, The Economist, live,weblink" title="web.archive.org/web/20170801064646weblink">weblink 1 August 2017, The restaurant industry is commonly studied because of its high number of minimum wage workers. A 2018 study from the Center on Wage and Employment Dynamics at the University of California, Berkeley focusing on food services showed that minimum wage increases in Washington, Chicago, Seattle, San Francisco, Oakland, and San Jose gave workers higher pay without hampering job growth.NEWS, Eidelson, Josh, 6 September 2018, Higher Minimum Wage Boosts Pay Without Reducing Jobs, Study Says,weblink Bloomberg, 20 September 2018, A 2017 study of restaurants in the San Francisco Bay Area examined the period 2008-2016 and the effect that a minimum wage increase had on the probability of restaurants going out of business, and broke out results based on the restaurant's rating on the review site Yelp. The study found no effect for 5-star (highest rated) restaurants (regardless of the expensiveness of the cuisine) but those with increasingly lower ratings were increasingly likely to go out of business (for example a 14% increase at 3.5 stars for a $1 per hour minimum wage increase). It also noted that the Yelp star rating was correlated with likelihood of minority ownership and minority customer base. Importantly, it noted that restaurants below 4 star in rating were proportionally more likely to hire low-skilled workers. The minimum wage increases during this period did not prevent growth in the industry overall – the number of restaurants in San Francisco went from 3,600 in 2012 to 7,600 in 2016.NEWS,weblink Minimum wage increases can kill businesses — if they already stink, 19 May 2017, Michael Hiltzik, The Los Angeles Times, An August 2019 study from The New School's Center for New York City Affairs found that the restaurant industry in New York City has been "thriving" following an increase in the minimum wage to $15 an hour.NEWS, Akhtar, Allana, August 10, 2019, NYC's $15 minimum wage hasn't brought the restaurant apocalypse — it's helped them thrive,weblink Business Insider, August 10, 2019, A 2019 study in the Quarterly Journal of Economics found that minimum wage increases did not have an impact on the overall number of low-wage jobs in the five years subsequent to the wage increase. However, it did find disemployment in 'tradeable' sectors, defined as those sectors most reliant on entry level or low skilled labor.JOURNAL, Zipperer, Ben, Lindner, Attila, Dube, Arindrajit, Cengiz, Doruk, The Effect of Minimum Wages on Low-Wage Jobs, The Quarterly Journal of Economics, 134, 3, 1405–1454, 10.1093/qje/qjz014, 2019, In another study, which shared authors with the above, published in the American Economic Review found that a large and persistent increase in the minimum wage in Hungary produced some disemployment with the large majority of additional cost being passed on to consumers. The authors also found that firms began substituting capital for labor over time.JOURNAL, Harasztosi, Péter, Lindner, Attila, Who Pays the Minimum Wage?,weblink American Economic Review, 10.1093/qje/qjz014,

Card and Krueger

In 1992, the minimum wage in New Jersey increased from $4.25 to $5.05 per hour (an 18.8% increase), while in the adjacent state of Pennsylvania it remained at $4.25. David Card and Alan Krueger gathered information on fast food restaurants in New Jersey and eastern Pennsylvania in an attempt to see what effect this increase had on employment within New Jersey. A basic supply and demand model predicts that relative employment should have decreased in New Jersey. Card and Krueger surveyed employers before the April 1992 New Jersey increase, and again in November–December 1992, asking managers for data on the full-time equivalent staff level of their restaurants both times.JOURNAL, David, Card, Alan B., Krueger, Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania, The American Economic Review, 84, 4, September 1994, 772–93, 2118030,weblink Based on data from the employers' responses, the authors concluded that the increase in the minimum wage slightly increased employment in the New Jersey restaurants.Card and Krueger expanded on this initial article in their 1995 book Myth and Measurement: The New Economics of the Minimum Wage.{{ISBN|0-691-04823-1}}{{full citation needed|date=December 2013}}{{page needed|date=December 2013}} They argued that the negative employment effects of minimum wage laws are minimal if not non-existent. For example, they look at the 1992 increase in New Jersey's minimum wage, the 1988 rise in California's minimum wage, and the 1990–91 increases in the federal minimum wage. In addition to their own findings, they reanalyzed earlier studies with updated data, generally finding that the older results of a negative employment effect did not hold up in the larger datasets.JOURNAL, Card, Krueger, 2000, Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply, American Economic Review, 90, 5, 1397–420, 10.1257/aer.90.5.1397,

Research subsequent to Card and Krueger's work

File:Minimum wage effects across state borders, estimates using contiguous counties.jpg|thumb|A 2010 study published in the (Review of Economics and Statistics]] compared 288 pairs of contiguous U.S. counties with minimum wage differentials from 1990 to 2006 and found no adverse employment effects from a minimum wage increase. Contiguous counties with different minimum wages are in purple. All other counties are in white.JOURNAL, Dube, Arindrajit, Lester, T. William, Reich, Michael, Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties, Review of Economics and Statistics, November 2010, 92, 4, 945–64, 10.1162/REST_a_00039,weblink 10 March 2014, 10.1.1.372.5805, )In 1996, David Neumark and William Wascher reexamined Card and Krueger's result using administrative payroll records from a sample of large fast food restaurant chains, and reported that minimum wage increases were followed by decreases in employment. An assessment of data collected and analyzed by Neumark and Wascher did not initially contradict the Card and Krueger results,WEB, The Minimum Wage and Job Loss, John, Schmitt, 1 January 1996,weblink Economic Policy Institute, 7 December 2013, live,weblink" title="web.archive.org/web/20140329035236weblink">weblink 29 March 2014, but in a later edited version they found a four percent decrease in employment, and reported that "the estimated disemployment effects in the payroll data are often statistically significant at the 5- or 10-percent level although there are some estimators and subsamples that yield insignificant—although almost always negative" employment effects.JOURNAL, David, Neumark, William, Wascher, Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Comment, The American Economic Review, 90, 5, December 2000, 1362–96, 2677855, 10.1257/aer.90.5.1362,weblink{{full citation needed|date=December 2013}} {{dead link|date=June 2016|bot=medic}}{{cbignore|bot=medic}} Neumark and Wascher's conclusions were subsequently rebutted in a 2000 paper by Card and Krueger.Card and Krueger (2000) "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply" American Economic Review, Volume 90 No. 5. pg 1397-1420 A 2011 paper has reconciled the difference between Card and Krueger's survey data and Neumark and Wascher's payroll-based data. The paper shows that both datasets evidence conditional employment effects that are positive for small restaurants, but are negative for large fast-food restaurants.JOURNAL, Ropponen, Olli, Reconciling the evidence of Card and Krueger (1994) and Neumark and Wascher (2000), Journal of Applied Econometrics, 2011, 26, 6, 1051–57, 10.1002/jae.1258, 10138/26140, A 2014 analysis based on panel data found that the minimum wage reduces employment among teenagers."Revisiting the Minimum Wage—Employment Debate: Throwing Out the Baby with the Bathwater?" by David Neumark, J. M. Ian Salas, William Wascher. Published in ILR Review. Vol 67, Issue 3_suppl, 2014. URL: JOURNAL, Archived copy, ILR Review, 67, 3_suppl, 608–648, live, 10.1177/00197939140670S307, 2014, Neumark, David, Salas, J. M. Ian, Wascher, William, 10419/69384, .In 1996 and 1997, the federal minimum wage was increased from $4.25 to $5.15, thereby increasing the minimum wage by $0.90 in Pennsylvania but by just $0.10 in New Jersey; this allowed for an examination of the effects of minimum wage increases in the same area, subsequent to the 1992 change studied by Card and Krueger. A study by Hoffman and Trace found the result anticipated by traditional theory: a detrimental effect on employment.JOURNAL, 10.1057/eej.2008.1, NJ and PA Once Again: What Happened to Employment when the PA–NJ Minimum Wage Differential Disappeared?, 2009, Hoffman, Saul D, Trace, Diane M, Eastern Economic Journal, 35, 1, 115–28,weblink Further application of the methodology used by Card and Krueger by other researchers yielded results similar to their original findings, across additional data sets. A 2010 study by three economists (Arindrajit Dube of the University of Massachusetts Amherst, William Lester of the University of North Carolina at Chapel Hill, and Michael Reich of the University of California, Berkeley), compared adjacent counties in different states where the minimum wage had been raised in one of the states. They analyzed employment trends for several categories of low-wage workers from 1990 to 2006 and found that increases in minimum wages had no negative effects on low-wage employment and successfully increased the income of workers in food services and retail employment, as well as the narrower category of workers in restaurants.JOURNAL, Arindrajit, Dube, T. William, Lester, Michael, Reich, Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties,weblink November 2010, The Review of Economics and Statistics, 92, 4, 945–64, 10.1162/REST_a_00039, live,weblink" title="web.archive.org/web/20130112214949weblink">weblink 12 January 2013, 10.1.1.372.5805, NEWS, Folbre, Nancy, Along the Minimum-Wage Battle Front,weblink 4 December 2013, New York Times, 1 November 2010, live,weblink" title="web.archive.org/web/20131204000907weblink">weblink 4 December 2013, However, a 2011 study by Baskaya and Rubinstein of Brown University found that at the federal level, "a rise in minimum wage have [sic] an instantaneous impact on wage rates and a corresponding negative impact on employment", stating, "Minimum wage increases boost teenage wage rates and reduce teenage employment."NEWS,weblink Using Federal Minimum Wages to Identify the Impact of Minimum Wages on Employment and Earnings Across the U.S. States, 1 October 2011, Another 2011 study by Sen, Rybczynski, and Van De Waal found that "a 10% increase in the minimum wage is significantly correlated with a 3−5% drop in teen employment."NEWS,weblink Teen employment, poverty, and the minimum wage: Evidence from Canada, 1 January 2011, live,weblink 16 September 2015, A 2012 study by Sabia, Hansen, and Burkhauser found that "minimum wage increases can have substantial adverse labor demand effects for low-skilled individuals", with the largest effects on those aged 16 to 24.NEWS,weblink Are the Effects of Minimum Wage Increases Always Small? New Evidence from a Case Study of New York State, 2 April 2012, live,weblink 26 September 2015, A 2013 study by Meer and West concluded that "the minimum wage reduces net job growth, primarily through its effect on job creation by expanding establishments ... most pronounced for younger workers and in industries with a higher proportion of low-wage workers." This study by Meer and West was later critiqued for its trends of assumption in the context of narrowly defined low-wage groups.JOURNAL, Dube, Arindrajit, 26 October 2013, Minimum Wages and Aggregate Job Growth: Causal Effect or Statistical Artifact?, Rochester, NY, 2345591, The authors replied to the critiques and released additional data which addressed the criticism of their methodology, but did not resolve the issue of whether their data showed a causal relationship.WEB,weblink More on Meer and West's Minimum Wage Study, John, Schmitt, live,weblink" title="web.archive.org/web/20141026214006weblink">weblink 26 October 2014, WEB,weblink Archived copy, 24 October 2014, live,weblink" title="web.archive.org/web/20150402182812weblink">weblink 2 April 2015, A 2019 paper published in the Quarterly Journal of Economics by Cengiz, Dube, Lindner and Zipperer argues that the job losses found using a Meer and West type methodology "tend to be driven by an unrealistically large drop in the number of jobs at the upper tail of the wage distribution, which is unlikely to be a causal effect of the minimum wage."JOURNAL, Zipperer, Ben, Lindner, Attila, Dube, Arindrajit, Cengiz, Doruk, 2019-08-01, The Effect of Minimum Wages on Low-Wage Jobs,weblink The Quarterly Journal of Economics, 134, 3, 1405–1454, 10.1093/qje/qjz014, 0033-5533, Another 2013 study by Suzana Laporšek of the University of Primorska, on youth unemployment in Europe claimed there was "a negative, statistically significant impact of minimum wage on youth employment."NEWS,weblink Minimum wage effects on youth employment in the European Union, 14 September 2013, live,weblink 16 October 2015, A 2013 study by labor economists Tony Fang and Carl Lin which studied minimum wages and employment in China, found that "minimum wage changes have significant adverse effects on employment in the Eastern and Central regions of China, and result in disemployment for females, young adults, and low-skilled workers".NEWS,weblink Minimum Wages and Employment in China, 14 December 2013, live,weblink 18 September 2015, JOURNAL, Minimum wages and employment in China, IZA Journal of Labor Policy, 27 November 2015, 2193-9004, 22, 4, 1, 10.1186/s40173-015-0050-9, Tony, Fang, Carl, Lin, A 2017 study found that in Seattle, increasing the minimum wage to $13 per hour lowered income of low-wage workers by $125 per month, due to the resulting reduction in hours worked, as industries made changes to make their businesses less labor intensive. The authors argue that previous research that found no negative effects on hours worked are flawed because they only look at select industries, or only look at teenagers, instead of entire economies.Ekaterina Jardim Mark C. Long Robert Plotnick Emma van Inwegen Jacob Vigdor Hilary Wething. "Minimum Wage Increases, wages, and low-wage employment: Evidence from Seattle." National Bureau of Economic Research.weblink a study by Overstreet in 2019 examined increases to the minimum wage in Arizona. Utilizing data spanning from 1976 to 2017, Overstreet found that a 1% increase in the minimum wage was significantly correlated with a 1.13% increase in per capita income in Arizona. This study could show that smaller increases in minimum wage may not distort labor market as significantly as larger increases experienced in other cities and states. Thus, the small increases experienced in Arizona may have actually led to a slight increase in economic growth.Overstreet, Dallin. "The Effect of Minimum Wage on Per Capita Income in Arizona: Empirical Analysis." Poverty & Public Policy 11.1-2 (2019): 156-168weblink

Statistical meta-analyses

Several researchers have conducted statistical meta-analyses of the employment effects of the minimum wage. In 1995, Card and Krueger analyzed 14 earlier time-series studies on minimum wages and concluded that there was clear evidence of publication bias (in favor of studies that found a statistically significant negative employment effect). They point out that later studies, which had more data and lower standard errors, did not show the expected increase in t-statistic (almost all the studies had a t-statistic of about two, just above the level of statistical significance at the .05 level).JOURNAL, David, Card, Alan B., Krueger, May 1995, Time-Series Minimum-Wage Studies: A Meta-analysis, The American Economic Review, 85, 2, 238–43, 2117925, Though a serious methodological indictment, opponents of the minimum wage largely ignored this issue; as Thomas Leonard noted, "The silence is fairly deafening."JOURNAL, 10.1215/00182702-32-Suppl_1-117, The Very Idea of Applying Economics: The Modern Minimum-Wage Controversy and Its Antecedents, 2000, Leonard, T. C., History of Political Economy, 32, 117,weblink live,weblink 17 November 2017, 10.1.1.422.8197, In 2005, T.D. Stanley showed that Card and Krueger's results could signify either publication bias or the absence of a minimum wage effect. However, using a different methodology, Stanley concluded that there is evidence of publication bias and that correction of this bias shows no relationship between the minimum wage and unemployment.JOURNAL, 10.1111/j.0950-0804.2005.00250.x, Beyond Publication Bias, 2005, Stanley, T. D., Journal of Economic Surveys, 19, 3, 309, In 2008, Hristos Doucouliagos and T.D. Stanley conducted a similar meta-analysis of 64 U.S. studies on disemployment effects and concluded that Card and Krueger's initial claim of publication bias is still correct. Moreover, they concluded, "Once this publication selection is corrected, little or no evidence of a negative association between minimum wages and employment remains."JOURNAL, 10.1111/j.1467-8543.2009.00723.x, Publication Selection Bias in Minimum-Wage Research? A Meta-Regression Analysis, 2009, Doucouliagos, Hristos, Stanley, T. D., British Journal of Industrial Relations, 47, 2, 406–28, In 2013, a meta-analysis of 16 UK studies found no significant effects on employment attributable to the minimum wage."Does the UK Minimum Wage Reduce Employment? A Meta-Regression Analysis" {{webarchive|url=https://web.archive.org/web/20170802122927weblink |date=2 August 2017 }}.y Megan de Linde Leonard, T. D. Stanley, and Hristos Doucouliagos. BJIR. vol. 52, iss. 3, September 2014, pp. 499–520. {{DOI|10.1111/bjir.12031}}. a 2007 meta-analyses by David Neumark of 96 studies found a consistent, but not always statistically significant, negative effect on employment from increases in the minimum wage.D. Neumark and W.L. Wascher, Minimum Wages and Employment, Foundations and Trends in Microeconomics, vol. 3, no. 1+2, pp 1-182, 2007.weblink

Debate over consequences

Minimum wage laws affect workers in most low-paid fields of employment and have usually been judged against the criterion of reducing poverty.BOOK, Eatwell, John, Ed., Murray Milgate, Peter Newman, The New Palgrave: A Dictionary of Economics, The Macmillan Press Limited, 1987, London, 476–78, 978-0-333-37235-7, Minimum wage laws receive less support from economists than from the general public. Despite decades of experience and economic research, debates about the costs and benefits of minimum wages continue today.Various groups have great ideological, political, financial, and emotional investments in issues surrounding minimum wage laws. For example, agencies that administer the laws have a vested interest in showing that "their" laws do not create unemployment, as do labor unions whose members' finances are protected by minimum wage laws. On the other side of the issue, low-wage employers such as restaurants finance the Employment Policies Institute, which has released numerous studies opposing the minimum wage.NEWS, Harry, Bernstein, Troubling Facts on Employment, Los Angeles Times, 15 September 1992, D3,weblink 6 December 2013, live,weblink" title="web.archive.org/web/20131217204239weblink">weblink 17 December 2013, JOURNAL, Erik, Engquist, May 2006, Health bill fight nears showdown, Crain's New York Business, 22, 20, 1, The presence of these powerful groups and factors means that the debate on the issue is not always based on dispassionate analysis. Additionally, it is extraordinarily difficult to separate the effects of minimum wage from all the other variables that affect employment.The following table summarizes the arguments made by those for and against minimum wage laws:{| class="wikitable"! scope=col style="text-align:left;" | Arguments in favor of minimum wage laws! scope=col style="text-align:left;" | Arguments against minimum wage laws style="vertical-align:top"| Supporters of the minimum wage claim it has these effects:
  • Improves functioning of the low-wage labor market which may be characterized by employer-side market power (monopsony).JOURNAL, Von Wachter, Till, Taska, Bledi, Marinescu, Ioana Elena, Huet-Vaughn, Emiliano, Azar, José, 2019-07-05, Minimum Wage Employment Effects and Labor Market Concentration,weblink Rochester, NY, JOURNAL, Dube, Arindrajit, Lester, T. William, Reich, Michael, 2015-12-21, Minimum Wage Shocks, Employment Flows, and Labor Market Frictions,weblink Journal of Labor Economics, 34, 3, 663–704, 10.1086/685449, 0734-306X,
  • Raises family incomes at the bottom of the income distribution, and lowers poverty.JOURNAL, Rinz, Kevin, Voorheis, John, March 2018, The Distributional Effects of Minimum Wages: Evidence from Linked Survey and Administrative Data,weblink JOURNAL, Dube, Arindrajit, Minimum Wages and the Distribution of Family Incomes,weblink American Economic Journal: Applied Economics, 10.1257/app.20170085, 1945-7782,
  • Positive impact on small business owners and industry.WEB,weblink Holly Sklar, Small Businesses Want Minimum Wage Increase – Business For a Fair Minimum Wage, St. Louis Post Dispatch, live,weblink" title="web.archive.org/web/20150117160937weblink">weblink 17 January 2015,
  • Removes financial stressWEB,weblink Raising the minimum wage could improve public health, live,weblink" title="web.archive.org/web/20160809005911weblink">weblink 9 August 2016, and encourages education,JOURNAL, 10.3386/w16355, The Unexpected Long-Run Impact of the Minimum Wage: An Educational Cascade, Richard, Sutch, NBER Working Paper No. 16355, September 2010, resulting in better paying jobs.
  • Increases the standard of living for the poorest and most vulnerable class in society and raises average.WEB,weblink Real Value of the Minimum Wage, Epi.org, 29 March 2013, live,weblink" title="web.archive.org/web/20130219034202weblink">weblink 19 February 2013,
  • Increases incentives to take jobs, as opposed to other methods of transferring income to the poor that are not tied to employment (such as food subsidies for the poor or welfare payments for the unemployed).JOURNAL, 10.1108/01437729410059305, Minimum Wages – Again!, 1994, Freeman, Richard B., International Journal of Manpower, 15, 2, 8–25,
  • Stimulates consumption, by putting more money in the hands of low-income people who spend their entire paychecks. Hence increases circulation of money through the economy.
  • Increased job growth and creation.WEB,weblink 2014 Job Creation Faster in States that Raised the Minimum Wage, Ben, Wolcott, live,weblink" title="web.archive.org/web/20141020223951weblink">weblink 20 October 2014, NEWS,weblink Bloomberg, Victoria, Stilwell, Highest Minimum-Wage State Washington Beats U.S. in Job Creation, 8 March 2014, live,weblink" title="web.archive.org/web/20150110111227weblink">weblink 10 January 2015, ; "Would Increasing the Minimum Wage Create Jobs?", The Atlantic, Jordan Weissmann, 20 December 2013; "The Guardian view on raising the minimum wage: slowly does it", Editorial, The Guardian, 10 May 2017
  • Encourages efficiency and automation of industry.Bernard Semmel, Imperialism and Social Reform: English Social-Imperial Thought 1895–1914 (London: Allen and Unwin, 1960), p. 63.
  • Removes low paying jobs, forcing workers to train for, and move to, higher paying jobs.JOURNAL,weblink ITIF Report Shows Self-service Technology a New Force in Economic Life, The Information Technology & Innovation Foundation, 14 April 2010, 5 October 2011, live,weblink" title="web.archive.org/web/20120119020955weblink">weblink 19 January 2012, JOURNAL, 10.2139/ssrn.936346, Technology and Labor Regulations, 2006, Alesina, Alberto F., Zeira, Joseph, 10.1.1.710.9997,
  • Increases technological development. Costly technology that increases business efficiency is more appealing as the price of labor increases.WEB,weblink Minimum Wages in canada : theory, evidence and policy, Hrsdc.gc.ca, 7 March 2008, 5 October 2011, live,weblink" title="web.archive.org/web/20120402010131weblink">weblink 2 April 2012,
  • Increases the work ethic of those who earn very little, as employers demand more return from the higher cost of hiring these employees.
  • Decreases the cost of government social welfare programs by increasing incomes for the lowest-paid.
  • Encourages people to join the workforce rather than pursuing money through illegal means, e.g., selling illegal drugsJOURNAL, 10.2139/ssrn.545382, Youth Crime and the Minimum Wage, 2004, Kallem, Andrew, WEB,weblink Crime and work: What we can learn from the low-wage labor market &124; Economic Policy Institute, Epi.org, 1 July 2000, 5 October 2011, live,weblink" title="web.archive.org/web/20110701232959weblink">weblink 1 July 2011, |
Opponents of the minimum wage claim it has these effects:
  • Minimum wage alone is not effective at alleviating poverty, and in fact produces a net increase in poverty due to disemployment effects.Kosteas, Vasilios D. "Minimum Wage." Encyclopedia of World Poverty. Ed. M. Odekon.Thousand Oaks, CA: Sage Publications, Inc., 2006. 719-21. SAGE knowledge. Web.
  • As a labor market analogue of political-economic protectionism, it excludes low cost competitors from labor markets and hampers firms in reducing wage costs during trade downturns. This generates various industrial-economic inefficiencies.Abbott, Lewis F. Statutory Minimum Wage Controls: A Critical Review of their Effects on Labour Markets, Employment, and Incomes. ISR Publications, Manchester UK, 2nd. edn. 2000. {{ISBN|978-0-906321-22-5}}. BOOK,weblink Statutory Minimum Wage Controls: A Critical Review of Their Effects on Labour Markets, Employment & Incomes, 7 November 2017, live,weblink 30 January 2018, 9780906321225, Abbott, Lewis F, 2012, {{page needed|date=December 2013}}
  • Hurts small business more than large business.WEB, Llewellyn H. Rockwell Jr.,weblink Wal-Mart Warms to the State, Mises Institute, Mises.org, 28 October 2005, 5 October 2011, live,weblink" title="web.archive.org/web/20090508122635weblink">weblink 8 May 2009,
  • Reduces quantity demanded of workers, either through a reduction in the number of hours worked by individuals, or through a reduction in the number of jobs.Tupy, Marian L. Minimum Interference {{webarchive|url=https://web.archive.org/web/20090218125417weblink |date=18 February 2009 }}, National Review Online, 14 May 2004NEWS,weblink The Wages of Politics, Wall Street Journal, 11 November 2006, 6 December 2013, live,weblink" title="web.archive.org/web/20131210232920weblink">weblink 10 December 2013,
  • May cause price inflation as businesses try to compensate by raising the prices of the goods being sold.WEB, Messmore, Ryan,weblink Increasing the Mandated Minimum Wage: Who Pays the Price?, Heritage.org, 5 October 2011, live,weblink" title="web.archive.org/web/20091128052437weblink">weblink 28 November 2009, WEB, Art Carden,weblink Why Wal-Mart Matters, Mises Institute, Mises.org, 5 October 2011, live,weblink" title="web.archive.org/web/20090411032001weblink">weblink 11 April 2009, 4 November 2006,
  • Benefits some workers at the expense of the poorest and least productive."Will have only negative effects on the distribution of economic justice. Minimum-wage legislation, by its very nature, benefits some at the expense of the least experienced, least productive, and poorest workers." (Cato) {{webarchive|url=https://web.archive.org/web/20070212111311weblink |date=12 February 2007 }}
  • Wage/price spiral
  • Encourages employers to replace low-skilled workers with computers, such as self-checkout machines.WEB


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  • Increases property crime and misery in poor communities by decreasing legal markets of production and consumption in those communities;JOURNAL, 725504, The Minimum Wage Law and Youth Crimes: Time-Series Evidence, The Journal of Law & Economics, 30, 2, 443–464, Hashimoto, Masanori, 1987, 10.1086/467144,
  • Can result in the exclusion of certain groups (ethnic, gender etc.) from the labor force.BOOK, South Africa's War Against Capitalism, Williams, Walter, 1989, Praeger, New York, 978-0-275-93179-7,weblink
  • Small firms with limited payroll budgets cannot offer their most valuable employees fair and attractive wages above unskilled workers paid the artificially high minimum, and see a rising hurdle-cost of adding workers.
  • Is less effective than other methods (e.g. the Earned Income Tax Credit) at reducing poverty, and is more damaging to businesses than those other methods.A blunt instrument {{webarchive|url=https://web.archive.org/web/20080520133933weblink |date=20 May 2008 }}, The Economist, 26 October 2006 {{en icon}}
  • Discourages further education among the poor by enticing people to enter the job market.
  • Discriminates against, through pricing out, less qualified workers (including newcomers to the labor market, e.g. young workers) by keeping them from accumulating work experience and qualifications, hence potentially graduating to higher wages later.
  • Slows growth in the creation of low-skilled jobsJOURNAL, Jonathan, Meer, Jeremy, West, 2016, Effects of the Minimum Wage on Employment Dynamics, Journal of Human Resources, 51, 2, 500–522, 10.3368/jhr.51.2.0414-6298R1, 10.1.1.705.3838,
  • Results in jobs moving to other areas or countries which allow lower-cost labor.WEB,weblink Pros & Cons of Outsourcing Manufacturing Jobs, smallbusiness.chron.com, 2019-04-24,
  • Results in higher long-term unemployment.JOURNAL, 10.1007/s12122-999-1007-9, Do minimum wage hikes reduce employment? State-level evidence from the low-wage retail sector, Journal of Labor Research, 20, 3, 393, 1999, Partridge, M. D., Partridge, J. S.,
  • Results in higher prices for consumers, where products and services are produced by minimum-wage workersWEB,weblink The Effects of a Minimum-Wage Increase on Employment and Family Income, 18 February 2014, 26 July 2014, live,weblink" title="web.archive.org/web/20140725153738weblink">weblink 25 July 2014, (though non-labor costs represent a greater proportion of costs to consumers in industries like fast food and discount retail)WEB,weblink A $10.10 Minimum Wage Would Make A DVD At Walmart Cost One Cent More, Bryce, Covert, 21 February 2014, live,weblink" title="web.archive.org/web/20140729075549weblink">weblink 29 July 2014, WEB,weblink What Will a Minimum Wage Increase Cost You at McDonald's?, The Motley Fool, Travis, Hoium, 19 October 2016, live,weblink" title="web.archive.org/web/20140723072611weblink">weblink 23 July 2014,
A widely circulated argument that the minimum wage was ineffective at reducing poverty was provided by George Stigler in 1949:
  • Employment may fall more than in proportion to the wage increase, thereby reducing overall earnings;
  • As uncovered sectors of the economy absorb workers released from the covered sectors, the decrease in wages in the uncovered sectors may exceed the increase in wages in the covered ones;
  • The impact of the minimum wage on family income distribution may be negative unless the fewer but better jobs are allocated to members of needy families rather than to, for example, teenagers from families not in poverty;
  • Forbidding employers to pay less than a legal minimum is equivalent to forbidding workers to sell their labor for less than the minimum wage. The legal restriction that employers cannot pay less than a legislated wage is equivalent to the legal restriction that workers cannot work at all in the protected sector unless they can find employers willing to hire them at that wage.
In 2006, the International Labour Organization (ILO) argued that the minimum wage could not be directly linked to unemployment in countries that have suffered job losses. In April 2010, the Organisation for Economic Co-operation and Development (OECD) released a report arguing that countries could alleviate teen unemployment by "lowering the cost of employing low-skilled youth" through a sub-minimum training wage.Scarpetta, Stephano, Anne Sonnet and Thomas Manfredi,Rising Youth Unemployment During The Crisis: How To Prevent Negative Long-Term Consequences on a Generation?, 14 April 2010 (read-only PDF) {{webarchive|url=https://web.archive.org/web/20101105115117weblink$FILE/JT03281808.PDF |date=5 November 2010 }} A study of U.S. states showed that businesses' annual and average payrolls grow faster and employment grew at a faster rate in states with a minimum wage.Fiscal Policy Institute, "States with Minimum Wages Above the Federal Level have had Faster Small Business and Retail Job Growth," 30 March 2006. The study showed a correlation, but did not claim to prove causation.Although strongly opposed by both the business community and the Conservative Party when introduced in the UK in 1999, the Conservatives reversed their opposition in 2000.WEB,weblink$366581.htm, National Minimum Wage, politics.co.uk, 29 December 2007,weblink" title="web.archive.org/web/20071201162434weblink">weblink 1 December 2007, dead, Accounts differ as to the effects of the minimum wage. The Centre for Economic Performance found no discernible impact on employment levels from the wage increases,JOURNAL, Metcalf, David,weblink Why Has the British National Minimum Wage Had Little or No Impact on Employment?, April 2007, live,weblink 21 September 2015, while the Low Pay Commission found that employers had reduced their rate of hiring and employee hours employed, and found ways to cause current workers to be more productive (especially service companies).Low Pay Commission (2005). National Minimum Wage – Low Pay Commission Report 2005 {{webarchive|url=https://web.archive.org/web/20130116084704weblink |date=16 January 2013 }} The Institute for the Study of Labor found prices in the minimum wage sector rose significantly faster than prices in non-minimum wage sectors, in the four years following the implementation of the minimum wage.WEB, Wadsworth, Jonathan,weblink Did the National Minimum Wage Affect UK Prices, September 2009, Neither trade unions nor employer organizations contest the minimum wage, although the latter had especially done so heavily until 1999.In 2014, supporters of minimum wage cited a study that found that job creation within the United States is faster in states that raised their minimum wages.WEB,weblink States That Raised Minimum Wage See Faster Job Growth, Report Says, live,weblink" title="web.archive.org/web/20141025021348weblink">weblink 25 October 2014, NEWS,weblink USA Today, Christopher S., Rugaber, States with higher minimum wage gain more jobs, 19 July 2014, live,weblink 11 July 2017, In 2014, supporters of minimum wage cited news organizations who reported the state with the highest minimum-wage garnered more job creation than the rest of the United States.NEWS,weblink Bloomberg, Victoria, Stilwell, Highest Minimum-Wage State Washington Beats U.S. in Job Creation, 8 March 2014, live,weblink" title="web.archive.org/web/20150110111227weblink">weblink 10 January 2015, NEWS,weblink CNN, Katie, Lobosco, Washington state defies minimum wage logic, 14 May 2014, live,weblink" title="web.archive.org/web/20141025013846weblink">weblink 25 October 2014, WEB,weblink Did Washington State's Minimum Wage Bet Pay Off?, 5 March 2014, live,weblink" title="web.archive.org/web/20141120115641weblink">weblink 20 November 2014, NEWS,weblink The Washington Post, Harold, Meyerson, Harold Meyerson: A higher minimum wage may actually boost job creation, 21 May 2014, live,weblink 18 July 2017, WEB,weblink States That Raised Their Minimum Wages Are Experiencing Faster Job Growth, Bryce, Covert, 3 July 2014, live,weblink" title="web.archive.org/web/20141025022719weblink">weblink 25 October 2014, WEB,weblink Minimum Wage Question and Answer, Mike, Nellis, dead,weblink" title="web.archive.org/web/20141025024423weblink">weblink 25 October 2014, In 2014, in Seattle, Washington, liberal and progressive business owners who had supported the city's new $15 minimum wage said they might hold off on expanding their businesses and thus creating new jobs, due to the uncertain timescale of the wage increase implementation.Minimum Wage Limbo Keeps Small Business Owners Up At Night {{webarchive|url=https://web.archive.org/web/20150209165923weblink |date=9 February 2015 }}, kuow.org, 22 May 2014 However, subsequently at least two of the business owners quoted did expand.Seattle Magazine, March 23, 2015$15 minimum wage a surprising success for Seattle restaurant {{webarchive|url=https://web.archive.org/web/20160726215335weblink |date=26 July 2016 }}, KOMO News, 31 July 2015The dollar value of the minimum wage loses purchasing power over time due to inflation. Minimum wage laws, for instance proposals to index the minimum wage to average wages, have the potential to keep the dollar value of the minimum wage relevant and predictableweblink regard to the economic effects of introducing minimum wage legislation in Germany in January 2015, recent developments have shown that the feared increase in unemployment has not materialized, however, in some economic sectors and regions of the country, it came to a decline in job opportunities particularly for temporary and part-time workers, and some low-wage jobs have disappeared entirely.C. Eisenring (Dec 2015). Gefährliche Mindestlohn-Euphorie {{webarchive|url=https://web.archive.org/web/20160101063214weblink |date=1 January 2016 }} (in German). Neue Zürcher Zeitung. Retrieved 30 December 2015. Because of this overall positive development, the Deutsche Bundesbank revised its opinion, and ascertained that “the impact of the introduction of the minimum wage on the total volume of work appears to be very limited in the present business cycle”.R. Janssen (Sept 2015). The German Minimum Wage Is Not A Job Killer {{webarchive|url=https://web.archive.org/web/20151109094251weblink |date=9 November 2015 }}. Social Europe. Retrieved 30 December 2015.A 2019 study published in the American Journal of Preventive Medicine showed that in the United States, those states which have implemented a higher minimum wage saw a decline in the growth of suicide rates. The researchers say that for every one dollar increase, the annual suicide growth rate fell by 1.9%. The study covers all 50 states for the years 2006 to 2016.NEWS, Rapaport, Lisa, April 19, 2019, Higher state minimum wage tied to lower suicide rates,weblink Reuters, April 27, 2019,

Surveys of economists

According to a 1978 article in the American Economic Review, 90% of the economists surveyed agreed that the minimum wage increases unemployment among low-skilled workers.JOURNAL, J. R., Kearl, Clayne L., Pope, Gordon C., Whiting, Larry T., Wimmer, May 1979, A Confusion of Economists?, The American Economic Review, 69, 2, 28–37, 1801612, By 1992 the survey found 79% of economists in agreement with that statement,JOURNAL, Richard M., Alston, J. R., Kearl, Michael B., Vaughan, May 1992, Is There a Consensus Among Economists in 1990s?, The American Economic Review, 82, 2, 203–09, 2117401, and by 2000, 46% were in full agreement with the statement and 28% agreed with provisos (74% total).survey by Dan Fuller and Doris Geide-Stevenson using a sample of 308 economists surveyed by the American Economic AssociationBOOK, Hall, Robert Ernest, Economics: Principles and Applications, Centage Learning,weblink 978-1111798208, 2007, The authors of the 2000 study also reweighted data from a 1990 sample to show that at that time 62% of academic economists agreed with the statement above, while 20% agreed with provisos and 18% disagreed. They state that the reduction on consensus on this question is "likely" due to the Card and Krueger research and subsequent debate.JOURNAL, Fuller, Dan, Geide-Stevenson, Doris, 2003, Consensus Among Economists: Revisited, Journal of Economic Education, 34, 4, 369–87, 10.1080/00220480309595230, A similar survey in 2006 by Robert Whaples polled PhD members of the American Economic Association (AEA). Whaples found that 47% respondents wanted the minimum wage eliminated, 38% supported an increase, 14% wanted it kept at the current level, and 1% wanted it decreased.JOURNAL, 10.2202/1553-3832.1156, Do Economists Agree on Anything? Yes!, 2006, Whaples, Robert, The Economists' Voice, 3, 9, 1–6, Another survey in 2007 conducted by the University of New Hampshire Survey Center found that 73% of labor economists surveyed in the United States believed 150% of the then-current minimum wage would result in employment losses and 68% believed a mandated minimum wage would cause an increase in hiring of workers with greater skills. 31% felt that no hiring changes would result.WEB,weblink Archived copy, 16 August 2012, dead,weblink" title="web.archive.org/web/20071108090912weblink">weblink 8 November 2007, {{full citation needed|date=December 2013}}Surveys of labor economists have found a sharp split on the minimum wage. Fuchs et al. (1998) polled labor economists at the top 40 research universities in the United States on a variety of questions in the summer of 1996. Their 65 respondents were nearly evenly divided when asked if the minimum wage should be increased. They argued that the different policy views were not related to views on whether raising the minimum wage would reduce teen employment (the median economist said there would be a reduction of 1%), but on value differences such as income redistribution.JOURNAL, Victor R., Fuchs, Alan B., Krueger, James M., Poterba, September 1998, Economists' Views about Parameters, Values, and Policies: Survey Results in Labor and Public Economics, Journal of Economic Literature, 36, 3, 1387–425, 2564804, Daniel B. Klein and Stewart Dompe conclude, on the basis of previous surveys, "the average level of support for the minimum wage is somewhat higher among labor economists than among AEA members."JOURNAL, Klein, Daniel, Stewart, Dompe, Reasons for Supporting the Minimum Wage: Asking Signatories of the 'Raise the Minimum Wage' Statement, January 2007, Economics in Practice, 4, 1, 125–67,weblink live,weblink" title="web.archive.org/web/20111213221725weblink">weblink 13 December 2011, In 2007, Klein and Dompe conducted a non-anonymous survey of supporters of the minimum wage who had signed the "Raise the Minimum Wage" statement published by the Economic Policy Institute. 95 of the 605 signatories responded. They found that a majority signed on the grounds that it transferred income from employers to workers, or equalized bargaining power between them in the labor market. In addition, a majority considered disemployment to be a moderate potential drawback to the increase they supported.In 2013, a diverse group of 37 economics professors was surveyed on their view of the minimum wage's impact on employment. 34% of respondents agreed with the statement, "Raising the federal minimum wage to $9 per hour would make it noticeably harder for low-skilled workers to find employment." 32% disagreed and the remaining respondents were uncertain or had no opinion on the question. 47% agreed with the statement, "The distortionary costs of raising the federal minimum wage to $9 per hour and indexing it to inflation are sufficiently small compared with the benefits to low-skilled workers who can find employment that this would be a desirable policy", while 11% disagreed.WEB,weblink Minimum Wage, IGM Forum, 26 February 2013, 6 December 2013, live,weblink" title="web.archive.org/web/20130821030142weblink">weblink 21 August 2013,

Alternatives

Economists and other political commentators have proposed alternatives to the minimum wage. They argue that these alternatives may address the issue of poverty better than a minimum wage, as it would benefit a broader population of low wage earners, not cause any unemployment, and distribute the costs widely rather than concentrating it on employers of low wage workers.

Basic income

A basic income (or negative income tax - NIT) is a system of social security that periodically provides each citizen with a sum of money that is sufficient to live on frugally. Supporters of the basic-income idea argue that recipients of the basic income would have considerably more bargaining power when negotiating a wage with an employer, as there would be no risk of destitution for not taking the employment. As a result, jobseekers could spend more time looking for a more appropriate or satisfying job, or they could wait until a higher-paying job appeared. Alternatively, they could spend more time increasing their skills (via education and training), which would make them more suitable for higher-paying jobs, as well as provide numerous other benefits. Experiments on Basic Income and NIT in Canada and the USA show that people spent more time studying while the program{{which|date=June 2019}} was running.WEB
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, {{qn|date=June 2019}}Proponents argue that a basic income that is based on a broad tax base would be more economically efficient than a minimum wage, as the minimum wage effectively imposes a high marginal tax on employers, causing losses in efficiency.{{citation needed|date=December 2013}}

Guaranteed minimum income

A guaranteed minimum income is another proposed system of social welfare provision. It is similar to a basic income or negative income tax system, except that it is normally conditional and subject to a means test. Some proposals also stipulate a willingness to participate in the labor market, or a willingness to perform community services.WEB,weblink Suggestion: Raise welfare children in institutions, Star-News, 28 January 1972, 19 November 2013,

Refundable tax credit

A refundable tax credit is a mechanism whereby the tax system can reduce the tax owed by a household to below zero, and result in a net payment to the taxpayer beyond their own payments into the tax system. Examples of refundable tax credits include the earned income tax credit and the additional child tax credit in the US, and working tax credits and child tax credits in the UK. Such a system is slightly different from a negative income tax, in that the refundable tax credit is usually only paid to households that have earned at least some income. This policy is more targeted against poverty than the minimum wage, because it avoids subsidizing low-income workers who are supported by high-income households (for example, teenagers still living with their parents).NEWS, What The Research Says In The Minimum Wage Debate, WBUR, 28 April 2014, David Scharfenberg, In the United States, earned income tax credit rates, also known as EITC or EIC, vary by state—some are refundable while other states do not allow a refundable tax credit.WEB,weblink 50 State Resources Map on State EITCs, The Hatcher Group, 16 June 2010, dead,weblink" title="web.archive.org/web/20090423021254weblink">weblink 23 April 2009, The federal EITC program has been expanded by a number of presidents including Jimmy Carter, Ronald Reagan, George H.W. Bush, and Bill Clinton.WEB,weblink New Research Findings on the Effects of the Earned Income Tax Credit, Center on Budget and Policy Priorities, 30 June 2010, live,weblink" title="web.archive.org/web/20100617180942weblink">weblink 17 June 2010, In 1986, President Reagan described the EITC as "the best anti poverty, the best pro-family, the best job creation measure to come out of Congress."WEB,weblink Tax Reform and Poverty, Center on Budget and Policy Priorities, Jason, Furman, 10 April 2006, 7 December 2013, live,weblink" title="web.archive.org/web/20131213060957weblink">weblink 13 December 2013, The ability of the earned income tax credit to deliver larger monetary benefits to the poor workers than an increase in the minimum wage and at a lower cost to society was documented in a 2007 report by the Congressional Budget Office.WEB,weblink Response to a Request by Senator Grassley About the Effects of Increasing the Federal Minimum Wage Versus Expanding the Earned Income Tax Credit, Congressional Budget Office, 9 January 2007, 25 July 2008, live,weblink" title="web.archive.org/web/20080731074250weblink">weblink 31 July 2008, The Adam Smith Institute prefers cutting taxes on the poor and middle class instead of raising wages as an alternative to the minimum wage.WEB,weblink Archived copy, 19 March 2014, live,weblink" title="web.archive.org/web/20140413142735weblink">weblink 13 April 2014,

Collective bargaining

Italy, Sweden, Norway, Finland, and Denmark are examples of developed nations where there is no minimum wage that is required by legislation. Such nations, particularly the Nordics, have very high union participation rates.Olson, Parmy (9/01/2009). The Best Minimum Wages In Europe {{webarchive|url=https://web.archive.org/web/20170729205158weblink |date=29 July 2017 }}. Forbes. Retrieved 21 February 2014. Instead, minimum wage standards in different sectors are set by collective bargaining.NEWS,weblink Labor Criticizes, Lewiston Morning Tribune, 2 March 1933, Associated Press, 1, 6,

Wage subsidies

Some economists such as Scott SumnerWEB,weblink TheMoneyIllusion " You can't redistribute income . ., Sumner, Scott, www.themoneyillusion.com, 11 August 2017, live,weblink" title="web.archive.org/web/20170811222858weblink">weblink 11 August 2017, and Edmund PhelpsPhelps, Edmund S. "Low-wage employment subsidies versus the welfare state." The American Economic Review 84.2 (1994): 54-58. advocate a wage subsidy program. A wage subsidy is a payment made by a government for work people do. It is based either on an hourly basis or by income earned. Advocates argue that the primary deficiencies of the EITC and the minimum wage are best avoided by a wage subsidy.NEWS,weblink The Wage Subsidy: A Better Way to Help the Poor {{!, Manhattan Institute|date=25 September 2015|work=Manhattan Institute|access-date=11 August 2017|url-status=live|archiveurl=https://web.archive.org/web/20170811230231weblink|archivedate=11 August 2017}}WEB,weblink A Better Wage Hike, Cass, Oren, 19 August 2015, US NEWS,weblink" title="web.archive.org/web/20150820110346weblink">weblink 20 August 2015, dead, 11 August 2017, However, the wage subsidy in the United States suffers from a lack of political support from either major political party.WEB,weblink Noahpinion: Wage subsidies, Smith, Noah, 7 December 2013, Noahpinion, 11 August 2017, live,weblink" title="web.archive.org/web/20170811224635weblink">weblink 11 August 2017, NEWS,weblink Wage subsidies might be a good idea, but Republicans will never support it, Drum, Kevin, 3 December 2013, Mother Jones, 11 August 2017, live,weblink 11 August 2017,

Education and training

Providing education or funding apprenticeships or technical training can provide a bridge for low skilled workers to move into wages above a minimum wage. For example, Germany has adopted a state funded apprenticeship program that combines on-the-job and classroom training.Why Germany Is So Much Better at Training Its Workers Having more skills makes workers more valuable and more productive, but having a high minimum wage for low-skill jobs reduces the incentive to seek education and training.Alternatives to Raising Minimum Wage Moving some workers to higher-paying jobs will decrease the supply of workers willing to accept low-skill jobs, increasing the market wage for those low skilled jobs (assuming a stable labor market). However, in that solution the wage will still not increase above the marginal return for the role and will likely promote automation or business closure.

US movement

(File:Minimumwage demonstration.jpg|thumb|right|Protest calling for raising the Minneapolis minimum wage to $15/hour. 12 September 2016)In January 2014, seven Nobel economists—Kenneth Arrow, Peter Diamond, Eric Maskin, Thomas Schelling, Robert Solow, Michael Spence, and Joseph Stiglitz—and 600 other economists wrote a letter to the US Congress and the US President urging that, by 2016, the US government should raise the minimum wage to $10.10. They endorsed the Minimum Wage Fairness Act which was introduced by US Senator Tom Harkin in 2013.75 economists back minimum wage hike {{webarchive|url=https://web.archive.org/web/20150301002359weblink |date=1 March 2015 }} CNN Money, 14 January 2014Over 600 Economists Sign Letter In Support of $10.10 Minimum Wage {{webarchive|url=https://web.archive.org/web/20171009121909weblink |date=9 October 2017 }} Economist Statement on the Federal Minimum Wage, Economic Policy Institute U.S. Senator Bernie Sanders introduced a bill in 2015 that would raise the minimum wage to $15, and in his 2016 campaign for president ran on a platform of increasing it.WEB, Sanders Introduces Bill for $15-an-Hour Minimum Wage,weblink Sen. Bernie Sanders, 15 September 2015, live,weblink" title="web.archive.org/web/20150906010136weblink">weblink 6 September 2015, The rapid success of Fight for $15: 'This is a trend that cannot be stopped' {{webarchive|url=https://web.archive.org/web/20161201225220weblink |date=1 December 2016 }} S. Greenhouse, The Guardian, US-News, 24 July 2015 Although Sanders did not become the nominee, the Democratic National Committee adopted his $15 minimum wage push in their 2016 party platform.Alex Seitz-Wald, Democrats Advance Most Progressive Platform in Party History {{webarchive|url=https://web.archive.org/web/20160801171543weblink |date=1 August 2016 }}, NBC News (10 July 2016).Reactions from former McDonald's USA Ed Rensi about raising minimum wage to $15 is to completely push humans out of the picture when it comes to labor if they are to pay minimum wage at $15 they would look into replacing humans with machines as that would be the more cost-effective than having employees that are ineffective. During an interview on FOX Business Network’s Mornings with Maria, he stated that he believes an increase to $15 an hour would cause job loss at an extraordinary level. Rensi also believes it does not only affect the fast food industry, franchising he sees as the best business model in the United States, it is dependent on people that have low job skills that have to grow and if you cannot pay them a reasonable wage then they are going to be replaced with machines.WEB,weblink Fmr. Mcdonald's Usa Ceo: $35k Robots Cheaper Than Hiring At $15 Per Hour, Julia, Limitone, 24 May 2016, live,weblink" title="web.archive.org/web/20160713090754weblink">weblink 13 July 2016, In late March 2016, Governor of California Jerry Brown reached a deal to raise the minimum wage to $15 by 2022 for big businesses and 2023 for smaller businesses.California Reaches Deal For $15 Minimum Wage {{webarchive|url=https://web.archive.org/web/20160331204221weblink |date=31 March 2016 }} S. Bernstein, The Huffington Post, 28 March 2016In contrast, the relatively high minimum wage in Puerto Rico has been blamed by various politicians and commentators as a highly significant factor in the Puerto Rican government-debt crisis.When the Minimum Wage Really Bites: The Effect of the U.S.-Level Minimum on Puerto Rico {{webarchive|url=https://web.archive.org/web/20160607034457weblink |date=7 June 2016 }} Alida Castillo-Freeman, Richard B. Freeman (1992) in Immigration and the Workforce: Economic Consequences for the United States and Source AreasPuerto Rico’s crisis illustrates the risks of minimum wage hikes {{webarchive|url=https://web.archive.org/web/20160318203321weblink |date=18 March 2016 }} C. Lane, The Washington Post, 8 July 2015Memo to the Fight for $15: Puerto Rico Happens with a Too High Minimum Wage {{webarchive|url=https://web.archive.org/web/20171107225245weblink |date=7 November 2017 }} Tim Worstall, Forbes.com, 3 July 2015. One study concluded that "Employers are disinclined to hire workers because the US federal minimum wage is very high relative to the local average".Puerto Rico – A Way Forward {{webarchive|url=https://web.archive.org/web/20160405191811weblink |date=5 April 2016 }} by A. Krueger, R. Teja and A. Wolfe, 29 June 2015{{As of|2014|12}}, unions were exempt from recent minimum wage increases in Chicago, Illinois, SeaTac, Washington, and Milwaukee County, Wisconsin, as well as the California cities of Los Angeles, San Francisco, Long Beach, San Jose, Richmond, and Oakland."Minimum wage loophole written to help labor unions" {{webarchive|url=https://web.archive.org/web/20150906080902weblink |date=6 September 2015 }}, Washington Examiner, 24 December 2014URLHTTPS://WWW.OECD-ILIBRARY.ORG/EMPLOYMENT/DATA/EARNINGS/MINIMUM-WAGES-RELATIVE-TO-MEDIAN-WAGES_DATA-00313-EN, titleMinimum wages relative to median wages, websitewww.oecd-ilibrary.org, access-date2019-03-21, ">

Countries by minimal wage to average wage ratio {| class"wikitable sortable"URLHTTPS://WWW.OECD-ILIBRARY.ORG/EMPLOYMENT/DATA/EARNINGS/MINIMUM-WAGES-RELATIVE-TO-MEDIAN-WAGES_DATA-00313-EN, titleMinimum wages relative to median wages, websitewww.oecd-ilibrary.org, access-date2019-03-21,

!Country!2010!2011!2012!2013!2014!2015!2016!2017|Australia|0.45|0.45|0.44|0.44|0.44|0.44|0.45|0.46|Belgium|0.42|0.42|0.43|0.43|0.41|0.41|0.42|0.40|Canada|0.39|0.40|0.40|0.39|0.40|0.40|0.40|0.41|Chile|0.44|0.43|0.43|0.45|0.45|0.46|0.47|0.49|Czech Republic|0.32|0.31|0.31|0.31|0.32|0.33|0.34|0.35|Estonia|0.34|0.33|0.32|0.33|0.34|0.35|0.35|0.35|France|0.50|0.50|0.51|0.51|0.51|0.50|0.50|0.50|Greece|0.38|0.36|0.30|0.31|0.32|0.33|0.33|0.33|Hungary|0.35|0.36|0.40|0.40|0.40|0.40|0.39|0.40|Ireland|0.38|0.37|0.38|0.37|0.37|0.37|0.39|0.38|Israel|0.41|0.41|0.41|0.42|0.41|0.42|0.43|0.44|Japan|0.33|0.33|0.33|0.34|0.34|0.34|0.35|0.36South Korea>Korea|0.36|0.36|0.34|0.35|0.36|0.38|0.40|0.41|Luxembourg|0.46|0.47|0.47|0.47|0.45|0.45|0.44|0.43|Mexico|0.27|0.27|0.27|0.27|0.29|0.29|0.29|0.31|Netherlands|0.41|0.40|0.40|0.40|0.39|0.39|0.39|0.39|New Zealand|0.51|0.50|0.51|0.51|0.51|0.51|0.51|0.52|Poland|0.37|0.37|0.39|0.40|0.41|0.41|0.43|0.44|Portugal|0.36|0.36|0.36|0.36|0.39|0.40|0.42|0.43|Slovakia|0.37|0.36|0.36|0.36|0.37|0.37|0.38|0.38|Slovenia|0.48|0.49|0.50|0.52|0.49|0.49|0.48|0.48|Spain|0.32|0.32|0.32|0.32|0.31|0.31|0.31|0.34|Turkey|0.39|0.39|0.40|0.40|0.39|0.40|0.42|0.42|United Kingdom|0.38|0.38|0.39|0.39|0.40|0.41|0.41|0.44|United States|0.28|0.28|0.27|0.27|0.27|0.25|0.25|0.24|Latvia|0.38|0.41|0.39|0.37|0.39|0.41|0.41|0.39|Lithuania|0.40|0.39|0.38|0.44|0.41|0.40|0.45|0.43|Romania|0.32|0.33|0.33|0.35|0.38|0.40|0.41|0.44{| class="wikitable sortable"|+Countries by minimal wage to median wage ratio!Country!2010!2011!2012!2013!2014!2015!2016!2017|Australia|0.54|0.54|0.53|0.54|0.53|0.53|0.54|0.55|Belgium|0.5|0.51|0.51|0.51|0.49|0.49|0.49|0.47|Canada|0.44|0.45|0.45|0.44|0.45|0.45|0.46|0.46|Chile|0.71|0.67|0.67|0.67|0.68|0.66|0.69|0.71|Czech Republic|0.38|0.37|0.36|0.37|0.37|0.39|0.4|0.41|Estonia|0.4|0.39|0.38|0.4|0.4|0.41|0.41|0.41|France|0.62|0.62|0.63|0.63|0.63|0.62|0.62|0.62|Greece|0.48|0.52|0.44|0.46|0.47|0.48|0.48|0.48|Hungary|0.47|0.49|0.54|0.54|0.54|0.53|0.51|0.53|Ireland|0.44|0.43|0.43|0.43|0.45|0.43|0.46|0.46|Israel|0.56|0.56|0.56|0.57|0.55|0.57|0.58|0.59|Japan|0.37|0.38|0.38|0.39|0.39|0.4|0.4|0.42South Korea>Korea|0.45|0.45|0.43|0.44|0.46|0.49|0.5|0.53|Luxembourg|0.56|0.56|0.56|0.56|0.56|0.55|0.54|0.53|Mexico|0.35|0.36|0.36|0.37|0.37|0.37|0.37|0.4|Netherlands|0.47|0.47|0.47|0.47|0.46|0.46|0.47|0.47|New Zealand|0.59|0.59|0.59|0.59|0.6|0.6|0.61|0.6|Poland|0.45|0.45|0.48|0.5|0.51|0.51|0.53|0.54|Portugal|0.53|0.53|0.52|0.52|0.55|0.56|0.59|0.61|Slovakia|0.46|0.46|0.45|0.46|0.45|0.47|0.48|0.48|Slovenia|0.59|0.61|0.62|0.64|0.6|0.6|0.59|0.58|Spain|0.38|0.38|0.38|0.38|0.37|0.37|0.37|0.4|Turkey|0.7|0.71|0.73|0.72|0.69|0.7|0.74|0.74|United Kingdom|0.46|0.47|0.47|0.47|0.48|0.49|0.49|0.54|United States|0.39|0.38|0.38|0.37|0.37|0.36|0.35|0.34|Latvia|0.49|0.51|0.49|0.47|0.49|0.52|0.51|0.48|Lithuania|0.5|0.48|0.48|0.55|0.51|0.5|0.56|0.54|Romania|0.43|0.45|0.45|0.48|0.51|0.55|0.56|0.6

See also

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Notes

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Further reading

External links

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