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Minimum wage

2022 minimum wages in the OECD,
in US dollars purchasing power parity[1][needs update]
Country Dollars per hour
Australia
13.60
Luxembourg
13.60
Germany
13.50
France
13.50
New Zealand
13.20
Belgium
12.60
Netherlands
12.00
United Kingdom
11.80
Spain
11.40
Canada
11.10
Ireland
10.10
Slovenia
9.60
South Korea
9.50
Turkey
8.80
Japan
8.50
Poland
8.40
Lithuania
8.00
Portugal
7.40
United States
7.25
Israel
7.00
Romania
6.60
Czech Republic
6.30
Croatia
6.20
Hungary
6.20
Greece
5.90
Estonia
5.70
Slovakia
5.70
Latvia
4.80
Bulgaria
4.30
Costa Rica
4.10

A minimum wage is the lowest remuneration that employers can legally pay their employees—the price floor below which employees may not sell their labor. Most countries had introduced minimum wage legislation by the end of the 20th century.[2] Because minimum wages increase the cost of labor, companies often try to avoid minimum wage laws by using gig workers, by moving labor to locations with lower or nonexistent minimum wages, or by automating job functions.[3] Minimum wage policies can vary significantly between countries or even within a country, with different regions, sectors, or age groups having their own minimum wage rates. These variations are often influenced by factors such as the cost of living, regional economic conditions, and industry-specific factors.[4]

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 in 1894.[5] Although minimum wage laws are now in effect in many jurisdictions, differences of opinion exist about the benefits and drawbacks of a minimum wage. Additionally, minimum wage policies can be implemented through various methods, such as directly legislating specific wage rates, setting a formula that adjusts the minimum wage based on economic indicators, or having wage boards that determine minimum wages in consultation with representatives from employers, employees, and the government.[6]

Supply and demand models suggest that there may be employment losses from minimum wages; however, minimum wages can increase the efficiency of the labor market in monopsony scenarios, where individual employers have a degree of wage-setting power over the market as a whole.[7][8][9] Supporters of the minimum wage say it increases the standard of living of workers, reduces poverty, reduces inequality, and boosts morale.[10] In contrast, opponents of the minimum wage say it increases poverty and unemployment because some low-wage workers "will be unable to find work ... [and] will be pushed into the ranks of the unemployed".[11][12][13]

History edit

"It is a serious national evil that any class of his Majesty's subjects should receive less than a living wage in return for their utmost exertions. It was formerly supposed that the working of the laws of supply and demand would naturally regulate or eliminate that evil ... [and] ... ultimately produce a fair price. Where ... you have a powerful organisation on both sides ... there you have a healthy bargaining ... . But where you have what we call sweated trades, you have no organisation, no parity of bargaining, the good employer is undercut by the bad, and the bad employer is undercut by the worst ... where those conditions prevail you have not a condition of progress, but a condition of progressive degeneration."

Winston Churchill MP, Trade Boards Bill, Hansard House of Commons (28 April 1909) vol 4, col 388

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.[14][15] Edward, 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.[16] 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.[14]

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.[14]

By the early 19th century, the Statutes of Labourers was repealed as the increasingly capitalistic United Kingdom embraced laissez-faire policies which disfavored regulations of wages (whether upper or lower limits).[14] 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.

It was not until the 1890s that the first modern legislative attempts to regulate minimum wages were seen in New Zealand and Australia.[17] The movement for a minimum wage was initially focused on stopping sweatshop labor and controlling the proliferation of sweatshops in manufacturing industries.[18] 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.[19]

In the United States, the late 19th-century ideas for favoring a minimum wage also coincided with the eugenics movement. As a consequence, some economists at the time, including Royal Meeker and Henry Rogers Seager, argued for the adoption of a minimum wage not only to support the worker, but to support their desired semi- and skilled laborers while forcing the undesired workers (including the idle, immigrants, women, racial minorities, and the disabled) out of the labor market. The result, over the longer term, would be to limit the nondesired workers' ability to earn money and have families, and thereby, remove them from the economists' ideal society.[20]

Minimum wage laws edit

"It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country."

President Franklin D. Roosevelt, 1933[21][22]

The 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.[17] In the United States, statutory minimum wages were first introduced nationally in 1938,[23] and they were reintroduced and expanded in the United Kingdom in 1998.[24] There is now legislation or binding collective bargaining regarding minimum wage in more than 90 percent of all countries.[25][2] In the European Union, 21 out of 27 member states currently have national minimum wages.[26] 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.[27][28]

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), $16.28 per hour in the U.S. state of Washington,[29] or £8.91 (for those aged 25+) in the United Kingdom[30]—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, though most states have a higher minimum wage. However, some states do not have a minimum wage law, such as Louisiana and Tennessee, and other states have minimum wages below the federal minimum wage such as Georgia and Wyoming, although the federal minimum wage is enforced in those states.[31] 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.[32] India also has one of the most complicated systems with more than 1,200 minimum wage rates depending on the geographical region.[33]

Informal minimum wages edit

Customs, tight labor markets, and extra-legal pressures from governments or labor unions can each 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.[34]

Setting minimum wage edit

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.[35] 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.[36] Among workers and their representatives, political considerations weigh in as labor leaders seek to win support by demanding the highest possible rate.[37] Other concerns include purchasing power, inflation indexing and standardized working hours.

Impact of minimum wage on income inequality and poverty edit

Minimum wage policies have been debated for their impact on income inequality and poverty levels. Proponents argue that raising the minimum wage can help reduce income disparities, enabling low-income workers to afford basic necessities and contribute to the overall economy. Higher minimum wages may also have a ripple effect, pushing up wages for those earning slightly above the minimum wage.[38]

However, opponents contend that minimum wage increases can lead to job losses, particularly for low-skilled and entry-level workers, as businesses may be unable to afford higher labor costs and may respond by cutting jobs or hours.[39] They also argue that minimum wage increases may not effectively target those living in poverty, as many minimum wage earners are secondary earners in households with higher incomes.[40] Some studies suggest that targeted income support programs, such as the Earned Income Tax Credit (EITC) in the United States, may be more effective in addressing poverty.[41] The effectiveness of minimum wage policies in reducing income inequality and poverty remains a subject of ongoing debate and research.

Economic models edit

Supply and demand model edit

 
Graph showing the basic supply and demand model of the minimum wage in the labor market.

According 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.[13] One such textbook states:[9]

If a higher minimum wage increases the wage rates of unskilled workers above the level that would be established by market forces, the quantity of unskilled workers employed will fall. The minimum wage will price the services of the least productive (and therefore lowest-wage) workers out of the market. … the direct results of minimum wage legislation are clearly mixed. Some workers, most likely those whose previous wages were closest to the minimum, will enjoy higher wages. Others, particularly those with the lowest prelegislation wage rates, will be unable to find work. They will be pushed into the ranks of the unemployed.

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.[42] 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.[42] If no minimum wage is in place, wages will adjust until the 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.[42] 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.[34]

The supply and demand model implies that by mandating a price floor above the equilibrium wage, minimum wage laws will cause unemployment.[43][44] 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.[45]

Monopsony edit

 
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.[46]

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.[47][48]

Criticisms of the supply and demand model edit

Minimum vs median wage,
OECD countries 2022[49][needs update]
Country Minimum / median
Colombia
0.90
Costa Rica
0.88
Chile
0.72
New Zealand
0.71
Portugal
0.66
Turkey
0.65
Mexico
0.63
Slovenia
0.62
France
0.61
Korea
0.61
United Kingdom
0.58
Romania
0.55
Luxembourg
0.54
Australia
0.54
Germany
0.53
Israel
0.52
Poland
0.52
Slovak Republic
0.51
Greece
0.51
Spain
0.50
Canada
0.49
Hungary
0.48
Ireland
0.48
Croatia
0.47
Lithuania
0.46
Netherlands
0.46
Japan
0.46
Czech Republic
0.43
Estonia
0.43
Belgium
0.41

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, such as Pierangelo Garegnani,[50] Robert L. Vienneau,[51] and Arrigo Opocher and Ian Steedman,[52] building on the work of Piero Sraffa, argue that that model, even given all its assumptions, is logically incoherent. Michael Anyadike-Danes and Wynne Godley 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.[53] Graham White 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.[54]

Gary 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."[55]

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] 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.[56] 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.[57] 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.[58]

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' 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."[59]

Mathematical models of the minimum wage and frictional labor markets edit

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.[60] Specifically, these models focus on labor markets with frictions and may result in positive or negative outcomes from raising the minimum wage, depending on the circumstances.

Welfare and labor market participation edit

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   decide to participate in the labor market. In the basic search and matching model, the expected utility of unemployed persons   and that of employed persons   are defined by:

 
Let   be the wage,   the interest rate,   the instantaneous income of unemployed persons,   the exogenous job destruction rate,   the labor market tightness, and   the job finding rate. The profits   and   expected from a filled job and a vacant one are:
 
where   is the cost of a vacant job and   is the productivity. When the free entry condition   is satisfied, these two equalities yield the following relationship between the wage   and labor market tightness  :
 
If   represents a minimum wage that applies to all workers, this equation completely determines the equilibrium value of the labor market tightness  . There are two conditions associated with the matching function:
 
This implies that   is a decreasing function of the minimum wage  , and so is the job finding rate  . 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   to be:
 
Using the relationship between the wage and labor market tightness to eliminate the wage from the last equation gives us:
 
By maximizing   in this equation, with respect to the labor market tightness, it follows that:
 
where   is the elasticity of the matching function:
 
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  .  The level of the negotiated wage is  .

If  , 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  , an increase 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  . On the other hand, if  , any increases in the minimum wage entails a decline in labor market participation and an increase in unemployment.

Job search effort edit

In the model just presented, the minimum wage always increases unemployment. This result does not necessarily hold when the search effort of workers is endogenous.

Consider a model where the intensity of the job search is designated by the scalar  , 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   and that the wage distribution is degenerated to a single wage  . Denote   to be the cost arising from the search effort, with  . Then the discounted utilities are given by:

 
Therefore, the optimal search effort is such that the marginal cost of performing the search is equation to the marginal return:
 
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:
 
Then differentiating with respect to   and rearranging gives us:
 
where   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   at equilibrium is given by:
 
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 edit

 
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).[61]

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:[19]

  • 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.[13] In addition to the basic supply-demand intuition, there were a number of empirical studies that supported this view. For example, Edward Gramlich in 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.[62]

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.[63]

 
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.[64]

Some research suggests that the unemployment effects of small minimum wage increases are dominated by other factors.[65] 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.[66] 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."[67]

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."[68]

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 'tradable' sectors, defined as those sectors most reliant on entry level or low skilled labor.[69]

A 2018 study published by the university of California agrees with the study in the quarterly journal of economics and discusses how minimum wages actually cause fewer jobs for low skilled workers. Within the article it discusses a trade off for low to high skilled workers that when the minimum wage is increased GDP is more highly redistributed to high academia jobs.[70]

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.[71]

A 2013 study published in the Science direct journal agrees with the studies above as it describes that there is not a significant employment change due to increases in minimum wage. The study illustrates that there is not a-lot of national generalisability for minimum wage effects, studies done on one country often get generalised to others. Effect on employment can be low from minimum wage policies but these policies can also benefit welfare and poverty.[72]

David Card and Alan Krueger edit

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.[73] 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.[73]

Card and Krueger expanded on this initial article in their 1995 book Myth and Measurement: The New Economics of the Minimum Wage.[74] 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.[75]

Research after Card's and Krueger's work edit

 
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.[76]

In 1996, David Neumark and William Wascher reexamined Card's and Krueger's results 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,[77] 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.[78] Neumark and Wascher's conclusions were subsequently rebutted in a 2000 paper by Card and Krueger.[79]

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.[80] A 2014 analysis based on panel data found that the minimum wage reduces employment among teenagers.[81]

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.[82]

Further application of the methodology used by Card and Krueger by other researchers yielded results similar to their original findings, across additional data sets.[83] 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.[83][84]

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."[85] 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."[86] 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.[87]

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."[88] This study by Meer and West was later critiqued for its trends of assumption in the context of narrowly defined low-wage groups.[89] 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.[89][90]

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."[91] 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."[92] 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".[93][94]

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.[95]

Finally, 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.[96]

In 2019, economists from the Georgia Institute of Technology published a study that found a strong correlation between increases to the minimum wage and detectable harm to the financial conditions of small businesses, including a higher rate of bankruptcy, lower hiring rates, lower credit scores, and higher interest payments. The researchers noted that these small businesses were also correlated with minority ownership and minority customer bases.[97]

In July 2019, the United States Congressional Budget Office published the impact on proposed national $15 per hour legislation. It noted that workers who retained full employment would see a modest improvement in take home pay offset by a small decrease in working conditions and non-pecuniary benefits. However, this benefit is offset by three primary factors; the reduction in hours worked, the reduction in total employment, and the increased cost of goods and services. Those factors result in a decrease of about $33 billion in total income and nearly 1.7–3.7 million lost jobs in the first three years (the CBO also noted this figure increases over time).[98]

In response to an April 2016 Council of Economic Advisers (CEA) report advocating the raising of the minimum wage to deter crime, economists used data from the 1998–2016 Uniform Crime Reports (UCR), National Incident-Based Reporting System (NIBRS), and National Longitudinal Study of Youth (NLSY) to assess the impact of the minimum wage on crime. They found that increasing the minimum wage resulted in increased property crime arrests among those ages 16 to 24. They estimated that an increase of the Federal minimum wage to $15/hour would "generate criminal externality costs of nearly $2.4 billion."[99]

Economists in Denmark, relying on a discontinuity in wage rates when a worker turns 18, found that employment fell by 33% and total hours fell by 45% when the minimum wage law was in effect.[100]

According to the 2021 study "The Effects of Minimum Wage on Employment: New Evidences for Spain"[101][102] by the Bank of Spain, the sudden increase of minimum wage in Spain in 2019 by 22% (from 860 EUR/month, to 1050 EUR/month, projected to 12 annual payments) destroyed between 98,000 and 180,000 jobs, which corresponds to between 6% and 11% of jobs remunerated at minimum wage.

A 2021 study "Reallocation Effects of the Minimum Wage" in the Quarterly Journal of Economics found that the introduction of a nationwide minimum wage in Germany (8.50 EUR/hour) caused an increase in wages without leading to a reduction in employment. However, authors found that the lack of employment responses masks some important structural shifts in the economy: the minimum wage led to a reallocation of workers from smaller to larger, from lower-paying to higher-paying and from less- to more-productive establishments. Some small businesses had to exit the market, thus leading to an increment of market concentration and reduced competition among firms in the product market, which can lead to higher prices. The study also found that the reallocation of low-wage workers to higher-paying establishments came at the expense of increased commuting time, which might have left some workers worse off despite earning a higher wage.[103]

A 2010 work studied the effect of the UK minimum wage on prices. The minimum wage did not cause prices to rise faster than normal in the months following an increase. But in the longer term, sectors with many such workers[a] saw prices rise faster than other sectors, especially in the four years after the introduction of the minimum wage.[104]

A 2012 UK study on the minimum wage from 1997-2007 found it led to reduced wage-inequality and had positive to neutral effects on employment levels.[105]

A 2012 UK study found no evidence of "spill-over" effects from the minimum wage. Analysing 1998-2008 wage brackets, increases in the minimum wage did not cause increases in higher-earning brackets, and this was consistently found despite any changes to the model parameters.[b][106]

A 2016 US study on the 1979-2012 minimum wage found it was associated with reductions in wage inequality. It also indicates spill-over effects to higher-earning brackets - though it states this may be due to measurement error.[107]

Meta-analyses edit

In 2013, a meta-analysis of 16 UK studies found no significant effects on employment attributable to the minimum wage.[108]

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.[109]

A 2019 meta-analysis of developed countries reported "a very muted effect of minimum wages on employment, while significantly increasing the earnings of low paid workers."[110]

Publication bias amongst meta-analyses: 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).[111] Though a serious methodological indictment, opponents of the minimum wage largely ignored this issue; as Thomas Leonard noted, "The silence is fairly deafening."[112] In 2005, T.D. Stanley showed that Card's 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.[113] 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."[114]

Debate over consequences edit

 
Protesters in the United States call for an increased minimum wage as part of the "Fight for $15" movement to require a US$15 per hour minimum wage, 2015

Minimum wage laws affect workers in most low-paid fields of employment[19] and have usually been judged against the criterion of reducing poverty.[115] 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.[19]

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.[116][117] 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.[34]

Studies have found that minimum wages have the following positive effects:

  • Improves functioning of the low-wage labor market which may be characterized by employer-side market power (monopsony).[118][119]
  • Raises family incomes at the bottom of the income distribution, and lowers poverty.[120][121]
  • Positive impact on small business owners and industry.[122]
  • Encourages education,[123] resulting in better paying jobs.
  • 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).[124]
  • Increased job growth and creation.[125][126]
  • Encourages efficiency and automation of industry.[127]
  • Removes low paying jobs, forcing workers to train for, and move to, higher paying jobs.[128][129]
  • Increases technological development. Costly technology that increases business efficiency is more appealing as the price of labor increases.[130]
  • Encourages people to join the workforce rather than pursuing money through illegal means, e.g., selling illegal drugs[131]

Studies have found the following negative effects:

  • Minimum wage alone is not effective at alleviating poverty, and in fact produces a net increase in poverty due to disemployment effects.[132]
  • 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.[133]
  • 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.[134][135]
  • Wage/price spiral
  • Encourages employers to replace low-skilled workers with computers, such as self-checkout machines.[136]
  • Increases property crime and misery in poor communities by decreasing legal markets of production and consumption in those communities;[137]
  • Can result in the exclusion of certain groups (ethnic, gender etc.) from the labor force.[138]
  • 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.[139]
  • Discourages further education among the poor by enticing people to enter the job market.[139]
  • 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.[11]
  • Slows growth in the creation of low-skilled jobs[88]
  • Results in jobs moving to other areas or countries which allow lower-cost labor.[140]
  • Results in higher long-term unemployment.[141]
  • Results in higher prices for consumers, where products and services are produced by minimum-wage workers[142] (though non-labor costs represent a greater proportion of costs to consumers in industries like fast food and discount retail)[143][144]

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.[115] That may be seen as a legal violation of human right to work in its most basic interpretation as "a right to engage in productive employment, and not to be prevented from doing so".

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.[2] 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.[145] 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.[146] 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.[147] 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,[148] 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).[149] The Institute for the Study of Labor found prices in minimum wage sectors[c] rose faster than other sectors, especially in the four years after its introduction.[104] 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.[125][150][151] 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.[125][152][153][154][155][156][157]

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.[158] However, subsequently at least two of the business owners quoted did expand.[159][160]

With 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.[161] 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".[162]

A 2019 study published in the American Journal of Preventive Medicine showed that in the United States, those states that 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.[163]

According to a 2020 US study, the cost of 10% minimum wage increases for grocery store workers was fully passed through to consumers as 0.4% higher grocery prices.[164] Similarly, a 2021 study that covered 10,000 McDonald's restaurants in the US found that between 2016 and 2020, the cost of 10% minimum wage increases for McDonald's workers were passed through to customers as 1.4% increases in the price of a Big Mac.[165][166] This results in minimum wage workers getting a lesser increase in their "real wage" than in their nominal wage, because any goods and services they purchase made with minimum-wage labor have now increased in cost, analogous to an increase in the sales tax.[167]

According to a 2019 review of the academic literature by Arindrajit Dube, "overall, the most up to date body of research from US, UK and other developed countries points to a very muted effect of minimum wages on employment, while significantly increasing the earnings of low paid workers."[110]

According to a 2021 study "The Minimum Wage, EITC, and Criminal Recidivism" a minimum wage increase of $0.50 reduces the probability an ex-incarcerated individual returns to prison within 3 years by 2.15%; these reductions come mainly from recidivism of property and drug crimes.[168]

Surveys of economists edit

There used to be agreement among economists that the minimum wage adversely affected employment, but that consensus shifted in the early 1990s due to new research findings. According to one 2021 assessment, "there is no consensus on the employment effects of the minimum wage."[169]

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.[170] By 1992 the survey found 79% of economists in agreement with that statement,[171] and by 2000, 46% were in full agreement with the statement and 28% agreed with provisos (74% total).[172][173] 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.[174]

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.[175] 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.[176]

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.[177] 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."[178]

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.[178]

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.[179]

Alternatives edit

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 edit

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 United States show that people spent more time studying while the program[which?] was running.[180][need quotation to verify]

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]

Guaranteed minimum income edit

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.[181]

Refundable tax credit edit

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).[182]

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.[183] The federal EITC program has been expanded by a number of presidents including Jimmy Carter, Ronald Reagan, George H.W. Bush, and Bill Clinton.[184] 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."[185] 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.[186]

The Adam Smith Institute prefers cutting taxes on the poor and middle class instead of raising wages as an alternative to the minimum wage.[187]

Collective bargaining edit

Italy, Sweden, Norway, Finland, and Denmark are developed nations where legislation stipulates no minimum wage.[26][28] Instead, minimum wage standards in different sectors are set by collective bargaining.[188] Particularly the Scandinavian countries have very high union participation rates.[189]

Wage subsidies edit

Some economists such as Scott Sumner[190] and Edmund Phelps[191] 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.[192][193] Wage subsidies lack political support from either major political party in the United States.[194][195]

Education and training edit

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.[196] 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.[197] 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.

By country edit

Armenia edit

The concept of the national minimum wage emerged in Armenia in 1995. Since then, it has been increasing, on average, every couple of years. The longest unchanged streak of the national minimum wage was between 1999 and 2003, when it was set at 5,000 AMD, and between 2015 and 2019 where it was set at 55,000 AMD. In November 2022, the national minimum wage was subject to the latest increase. It was set at 75,000 AMD.[198][199]

Lebanon edit

After two years of constant financial meltdown, Lebanon as of 2021 is ranking as one of the 10 countries in the world with the lowest minimum wages because of the collapse of the local pound following the Lebanese financial crisis that started in August 2019.[200]

The minimum monthly wage set at LBP 675,000, which valued USD 450 prior to the crisis, is barely reaching USD 30 nowadays.[201] The currency has lost nearly 90% of its value and drove three quarters of residents into poverty.[202]

Article 44 of the Lebanese Code of Labor states that, “the minimum pay must be sufficient to meet the essential needs of the wage-earner or salary-earner and his family,” and according to Article 46, “the minimum pay assessed shall be rectified whenever economic circumstances render such review necessary.”[203]

Republic of Ireland edit

The national minimum wage was introduced in the Republic of Ireland in April 2000. Prior to this, minimum wages were set by industry-specific Joint Labour Committees. However, coverage for workers was low and the agreements were poorly enforced and moreover, those who were covered by agreements received low wages.

As of April 2000, the government introduced a national minimum wage of €5.58 per hour. The minimum wage increased regularly in the period from 2000 to 2007 and reached €8.65 per hour in July 2007. As the global economic downturn hit the country in 2008, there was no further wage increases until 2016 when the minimum wage was increased to 9.15.

Before the 2019, there existed specific categories of employees that earned sub-minimum wage rates, expressed as a percentage of the full rate of pay. Employees under the age of 18 were eligible to earn 70 per cent of the minimum wage, employees in the first year of employment were eligible to earn 80 per cent, employees in the second year of full employment were eligible to earn 90 per cent and employees in structured training during working hours were eligible to earn 75, 80 or 90 per cent depending on their level of progression. This framework has since been abolished in place of a framework based on the age of the employee.[204]

As of 1 January 2022, the minimum wage is €10.50. Those aged 20 and over are eligible to receive 100 percent of the minimum wage. Those under the age of 18 are eligible to receive 70 percent of the minimum wage, those aged 18 are eligible to receive 80 percent of the minimum wage and those aged 19 are eligible receive 90 percent of the minimum wage.[205]

South Korea edit

 
Minimum wage in South Korea with terms of presidents

The South Korean government enacted the Minimum Wage Act on December 31, 1986. The Minimum Wage System began on January 1, 1988. At this time the economy was booming,[206] and the minimum wage set by the government was less than 30 percent of that of real workers. The Minister of Employment and Labor in Korea asks the Minimum Wage Commission to review the minimum wage by March 31 every year. The Minimum Wage Commission must submit the minimum wage bill within 90 days after the request has been received by the 27 committee members. If there is no objection, the new minimum wage will then take effect from January 1. The minimum wage committee decided to raise the minimum wage in 2018 by 16.4% from the previous year to 7,530 won (US$7.03) per hour. This is the largest increase since 2001 when it was increased by 16.8%.

However, the government officially admitted that the policy of raising the minimum wage to 10,000 won by 2020, which had been the initial target but which the government had been forced to forego, had also caused a great burden on self-employed businesses and deteriorated the job market.[207] In addition, there are opinions from various media that the minimum wage law is not properly applied in Korea.[208][209]

Spain edit

The Spanish government sets the "Interprofessional Minimum Wage" (SMI) annually, after consulting with the most representative trade unions and business associations, for both permanent and temporary workers, as well as for domestic employees. It takes into account the consumer price index, national average productivity, the increase in labor's share in national income, and the general economic situation.[210][211]

The SMI can be revised semi-annually if the government's predictions about the consumer price index are not met. The amount set is a minimum wage, so it can be exceeded by a collective agreement or individual agreement with the company. The revision of the SMI does not affect the structure or amount of professional salaries being paid to workers when they are superior to the established minimum wage. Finally, the amount of the SMI is non-seizable.

The minimum wage was introduced in Spain in 1963 through Decree 55/1963, proposed by Jesús Romeo Gorría, the Minister of Labor during Francisco Franco's IX Government. The purpose was to ensure fair remuneration for all workers, adjusting wages to labor and economic conditions and advocating for salary equity. It was set at 1,800 pesetas/month (25,200 pesetas/year, 12 monthly payments plus 2 extra payments, as its customary in Spain as to this day), equivalent to 10.80 euros at the time but only 400 euros in today's prices.

In the years following Franco's death in 1975, the minimum wage gradually increased, reaching 50.49 euros (8,400 pesetas) that year, which is equivalent to 657.23 euros in today's currency.[212] Over the years, the minimum wage continued to rise, with several revisions along the way. In 2022, the Spanish government set the minimum wage at 33.33 euros per day or 1,000 euros per month, effective from January 1. This represents a 47% increase from the previous minimum wage set in 2018 at 735.90 euros.[213]

There are several debates around the minimum wage in Spain, which focus on its impact on employment and inflation. While some argue that increasing the minimum wage can be a useful tool to increase the incomes of low-income families and reduce poverty, others have doubts about its effectiveness in achieving these goals.

For instance, an analysis conducted by BCE (Central Bank of Spain, by its initials in spanish) in 2019 on the impact of the 2017 increase in the minimum wage showed a negative effect on the probability of maintaining employment among affected workers, which was particularly significant for older workers.[214]

Additionally, the 2022 raise of the minimum wage revived the debate about the relationship between inflation and the SMI, with some arguing that the increase in the minimum wage could potentially contribute to inflation. The debate centres on whether it's a useful tool to help maintain the purchasing power of those who retain their jobs, or it's not effective because it adds pressure to the growth of prices and increase the likelihood of inflation becoming entrenched.[215]

United States edit

 
Minimum wage by U.S. state, Washington, D.C., and territory. In states with lower or no minimum wage, federal rates apply to workers covered by the Fair Labor Standards Act.[216] Special minimum wages apply to some workers in American Samoa.[217][218]
  No minimum wage
  Lower state minimum wage than federal
  Same state minimum wage as federal
  Higher state minimum wage than federal
  Special rules (American Samoa only)
 
Minimum wage by state by year

In the United States, the minimum wage is set by U.S. labor law and a range of state and local laws.[219] The first federal minimum wage was instituted in the National Industrial Recovery Act of 1933, signed into law by President Franklin D. Roosevelt, but later found to be unconstitutional.[220] In 1938, the Fair Labor Standards Act established it at 25¢ an hour ($5.20 in 2022).[221] Its purchasing power peaked in 1968, at $1.60 ($13.00 in 2022)[221][222][223] In 2009, it was increased to $7.25 per hour, and has not been increased since.[224]

Employers have to pay workers the highest minimum wage of those prescribed by federal, state, and local laws. In August 2022, 30 states and the District of Columbia had minimum wages higher than the federal minimum.[225] In January 2020, almost 90% of Americans earning just minimum wage got more than $7.25 an hour.[226] The effective nationwide minimum wage (the wage that the average minimum-wage worker earns) was $11.80 in May 2019; this was the highest it had been since at least 1994, the earliest year for which effective-minimum-wage data are available.[227]

In 2021, the Congressional Budget Office estimated that incrementally raising the federal minimum wage to $15 an hour by 2025 would benefit 17 million workers but would also reduce employment by 1.4 million people.[228][229] It would also lift about 900,000 people out of poverty and might raise wages for 10 million more workers, cause prices to rise and overall economic output to decrease slightly, and increase the federal budget deficit by $54 billion over the next 10 years.[228][229][230][d] An Ipsos survey in August 2020 found that support for a rise in the federal minimum wage had grown substantially during the COVID-19 pandemic, with 72% of Americans in favor, including 62% of Republicans and 87% of Democrats.[231] A March 2021 poll by Monmouth University Polling Institute, conducted as a minimum-wage increase was being considered in Congress, found 53% of respondents supporting an increase to $15 an hour and 45% opposed.[232]

In 2019, 1.6 million Americans earned no more than the federal minimum wage—about 1% of workers, and less than 2% of those paid by the hour. Less than half worked full time; almost half were aged 16–25; and more than 60% worked in the leisure and hospitality industries, where many workers received tips in addition to their hourly wages. No significant differences existed among ethnic or racial groups; women were about twice as likely as men to earn minimum wage or less.[233] In May 2022, the legislature of Hawaii passed a bill to raise the minimum wage to $18 by 2028, the highest state minimum wage in the United States.[234] Governor David Ige signed the bill the next month.[235]

Australia edit

In Australia, the Fair Work Commission (FWC) is responsible for determining and setting a national minimum wage as well as the minimum wages in awards setting wage rates for particular occupations and industries. The Fair Work Act 2009 establishes an Expert panel tasked with providing and maintaining a safety net of a fair minimum wage. The Expert panel is made up of the president of the panel, three full time commission members, and three part time commission members. All members must have experience in workplace relations, economics, social policy or business, industry and commerce and can inform its decision making through commissioning a range of economic and social research.[236]

The legislative framework requires that, in setting minimum wages, the Expert Panel is required to take into account the current state of the economy, including inflation, business competitiveness, productivity and employment growth. In addition, the Expert panel must also consider the social goals of the promotion of social inclusion, the standard of living of the low paid, equal remuneration for work of equal or comparable value and reasonable wages for junior employees, employees whose jobs have training requirements and employees with disability.[237] See Fair Work Act 2009 for more information.

The Expert panel conducts yearly wage reviews, to determine if the minimum wage needs to be adjusted based on the economy's current and projected performance. The annual minimum wage review decisions in 2016–17 found, based on research tendered and submissions to the review, that moderate increases to minimum wages do not inhibit workplace participation or result in disemployment. This position was carried over to the 2017–18 and 2018–19 decisions[237] and informed the decisions including the 2018–19 decision which delivered a minimum wage increase of 3% when the corresponding headline rate of inflation was 1.3%.[238] In the annual minimum wage review decisions of 2019–20 and 2020–21, the FWC was considerably more constrained in setting minimum wages due to uncertain economic conditions during the COVID-19 pandemic and the 2020–21 decision noted the uncertainty of the impact of increases in the minimum wages for youth employment.[239]

See also edit

Notes edit

  1. ^ Notably take-away foods, canteen meals, hotel services and domestic services
  2. ^ No spill-over effects were found even after looking at only people who moved jobs (and so were able to negotiate a new salary), using wider brackets, bracketing in pence instead of percentages, and splitting the groups by gender
  3. ^ notably take-away foods, canteen meals, hotel services and domestic services
  4. ^ See the section on Employment for more detailed findings from this study, including employment estimates on raising the wage to $10 or $12 per hour.

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minimum, wage, this, article, long, read, navigate, comfortably, please, consider, splitting, content, into, articles, condensing, adding, subheadings, please, discuss, this, issue, article, talk, page, january, 2024, 2022, minimum, wages, oecd, dollars, purch. This article may be too long to read and navigate comfortably Please consider splitting content into sub articles condensing it or adding subheadings Please discuss this issue on the article s talk page January 2024 2022 minimum wages in the OECD in US dollars purchasing power parity 1 needs update Country Dollars per hourAustralia 13 60Luxembourg 13 60Germany 13 50France 13 50New Zealand 13 20Belgium 12 60Netherlands 12 00United Kingdom 11 80Spain 11 40Canada 11 10Ireland 10 10Slovenia 9 60South Korea 9 50Turkey 8 80Japan 8 50Poland 8 40Lithuania 8 00Portugal 7 40United States 7 25Israel 7 00Romania 6 60Czech Republic 6 30Croatia 6 20Hungary 6 20Greece 5 90Estonia 5 70Slovakia 5 70Latvia 4 80Bulgaria 4 30Costa Rica 4 10A minimum wage is the lowest remuneration that employers can legally pay their employees the price floor below which employees may not sell their labor Most countries had introduced minimum wage legislation by the end of the 20th century 2 Because minimum wages increase the cost of labor companies often try to avoid minimum wage laws by using gig workers by moving labor to locations with lower or nonexistent minimum wages or by automating job functions 3 Minimum wage policies can vary significantly between countries or even within a country with different regions sectors or age groups having their own minimum wage rates These variations are often influenced by factors such as the cost of living regional economic conditions and industry specific factors 4 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 in 1894 5 Although minimum wage laws are now in effect in many jurisdictions differences of opinion exist about the benefits and drawbacks of a minimum wage Additionally minimum wage policies can be implemented through various methods such as directly legislating specific wage rates setting a formula that adjusts the minimum wage based on economic indicators or having wage boards that determine minimum wages in consultation with representatives from employers employees and the government 6 Supply and demand models suggest that there may be employment losses from minimum wages however minimum wages can increase the efficiency of the labor market in monopsony scenarios where individual employers have a degree of wage setting power over the market as a whole 7 8 9 Supporters of the minimum wage say it increases the standard of living of workers reduces poverty reduces inequality and boosts morale 10 In contrast opponents of the minimum wage say it increases poverty and unemployment because some low wage workers will be unable to find work and will be pushed into the ranks of the unemployed 11 12 13 Contents 1 History 2 Minimum wage laws 2 1 Informal minimum wages 2 2 Setting minimum wage 2 3 Impact of minimum wage on income inequality and poverty 3 Economic models 3 1 Supply and demand model 3 2 Monopsony 3 3 Criticisms of the supply and demand model 3 4 Mathematical models of the minimum wage and frictional labor markets 3 4 1 Welfare and labor market participation 3 4 2 Job search effort 4 Empirical studies 4 1 David Card and Alan Krueger 4 2 Research after Card s and Krueger s work 4 2 1 Meta analyses 5 Debate over consequences 6 Surveys of economists 7 Alternatives 7 1 Basic income 7 2 Guaranteed minimum income 7 3 Refundable tax credit 7 4 Collective bargaining 7 5 Wage subsidies 7 6 Education and training 8 By country 8 1 Armenia 8 2 Lebanon 8 3 Republic of Ireland 8 4 South Korea 8 5 Spain 8 6 United States 8 7 Australia 9 See also 10 Notes 11 References 12 Further reading 13 External linksHistory edit It is a serious national evil that any class of his Majesty s subjects should receive less than a living wage in return for their utmost exertions It was formerly supposed that the working of the laws of supply and demand would naturally regulate or eliminate that evil and ultimately produce a fair price Where you have a powerful organisation on both sides there you have a healthy bargaining But where you have what we call sweated trades you have no organisation no parity of bargaining the good employer is undercut by the bad and the bad employer is undercut by the worst where those conditions prevail you have not a condition of progress but a condition of progressive degeneration Winston Churchill MP Trade Boards Bill Hansard House of Commons 28 April 1909 vol 4 col 388 Modern minimum wage laws trace their origin to the Ordinance of Labourers 1349 which was a decree by King Edward III that set amaximum wage for laborers in medieval England 14 15 Edward 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 16 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 14 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 14 By the early 19th century the Statutes of Labourers was repealed as the increasingly capitalistic United Kingdom embraced laissez faire policies which disfavored regulations of wages whether upper or lower limits 14 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 It was not until the 1890s that the first modern legislative attempts to regulate minimum wages were seen in New Zealand and Australia 17 The movement for a minimum wage was initially focused on stopping sweatshop labor and controlling the proliferation of sweatshops in manufacturing industries 18 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 19 In the United States the late 19th century ideas for favoring a minimum wage also coincided with the eugenics movement As a consequence some economists at the time including Royal Meeker and Henry Rogers Seager argued for the adoption of a minimum wage not only to support the worker but to support their desired semi and skilled laborers while forcing the undesired workers including the idle immigrants women racial minorities and the disabled out of the labor market The result over the longer term would be to limit the nondesired workers ability to earn money and have families and thereby remove them from the economists ideal society 20 Minimum wage laws edit It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country President Franklin D Roosevelt 1933 21 22 The 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 17 In the United States statutory minimum wages were first introduced nationally in 1938 23 and they were reintroduced and expanded in the United Kingdom in 1998 24 There is now legislation or binding collective bargaining regarding minimum wage in more than 90 percent of all countries 25 2 In the European Union 21 out of 27 member states currently have national minimum wages 26 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 27 28 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 16 28 per hour in the U S state of Washington 29 or 8 91 for those aged 25 in the United Kingdom 30 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 though most states have a higher minimum wage However some states do not have a minimum wage law such as Louisiana and Tennessee and other states have minimum wages below the federal minimum wage such as Georgia and Wyoming although the federal minimum wage is enforced in those states 31 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 32 India also has one of the most complicated systems with more than 1 200 minimum wage rates depending on the geographical region 33 Informal minimum wages edit Customs tight labor markets and extra legal pressures from governments or labor unions can each 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 34 Setting minimum wage edit 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 35 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 36 Among workers and their representatives political considerations weigh in as labor leaders seek to win support by demanding the highest possible rate 37 Other concerns include purchasing power inflation indexing and standardized working hours Impact of minimum wage on income inequality and poverty edit Minimum wage policies have been debated for their impact on income inequality and poverty levels Proponents argue that raising the minimum wage can help reduce income disparities enabling low income workers to afford basic necessities and contribute to the overall economy Higher minimum wages may also have a ripple effect pushing up wages for those earning slightly above the minimum wage 38 However opponents contend that minimum wage increases can lead to job losses particularly for low skilled and entry level workers as businesses may be unable to afford higher labor costs and may respond by cutting jobs or hours 39 They also argue that minimum wage increases may not effectively target those living in poverty as many minimum wage earners are secondary earners in households with higher incomes 40 Some studies suggest that targeted income support programs such as the Earned Income Tax Credit EITC in the United States may be more effective in addressing poverty 41 The effectiveness of minimum wage policies in reducing income inequality and poverty remains a subject of ongoing debate and research Economic models editSee also Labour economics Supply and demand model edit nbsp Graph showing the basic supply and demand model of the minimum wage in the labor market Main article Supply and demand According 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 13 One such textbook states 9 If a higher minimum wage increases the wage rates of unskilled workers above the level that would be established by market forces the quantity of unskilled workers employed will fall The minimum wage will price the services of the least productive and therefore lowest wage workers out of the market the direct results of minimum wage legislation are clearly mixed Some workers most likely those whose previous wages were closest to the minimum will enjoy higher wages Others particularly those with the lowest prelegislation wage rates will be unable to find work They will be pushed into the ranks of the unemployed 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 42 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 42 If no minimum wage is in place wages will adjust until the 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 42 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 34 The supply and demand model implies that by mandating a price floor above the equilibrium wage minimum wage laws will cause unemployment 43 44 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 45 Monopsony edit nbsp Modern economics suggests that a moderate minimum wage may increase employment as labor markets are monopsonistic and workers lack bargaining power Main article Monopsony 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 46 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 47 48 Criticisms of the supply and demand model edit Minimum vs median wage OECD countries 2022 49 needs update Country Minimum medianColombia 0 90Costa Rica 0 88Chile 0 72New Zealand 0 71Portugal 0 66Turkey 0 65Mexico 0 63Slovenia 0 62France 0 61Korea 0 61United Kingdom 0 58Romania 0 55Luxembourg 0 54Australia 0 54Germany 0 53Israel 0 52Poland 0 52Slovak Republic 0 51Greece 0 51Spain 0 50Canada 0 49Hungary 0 48Ireland 0 48Croatia 0 47Lithuania 0 46Netherlands 0 46Japan 0 46Czech Republic 0 43Estonia 0 43Belgium 0 41The argument that a minimum wage decreases employment is based on a simple supply and demand model of the labor market A number of economists such as Pierangelo Garegnani 50 Robert L Vienneau 51 and Arrigo Opocher and Ian Steedman 52 building on the work of Piero Sraffa argue that that model even given all its assumptions is logically incoherent Michael Anyadike Danes and Wynne Godley 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 53 Graham White 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 54 Gary 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 55 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 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 56 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 57 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 58 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 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 59 Mathematical models of the minimum wage and frictional labor markets edit 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 60 Specifically these models focus on labor markets with frictions and may result in positive or negative outcomes from raising the minimum wage depending on the circumstances Welfare and labor market participation edit This section may be too technical for most readers to understand Please help improve it to make it understandable to non experts without removing the technical details September 2022 Learn how and when to remove this template message 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 displaystyle V u nbsp decide to participate in the labor market In the basic search and matching model the expected utility of unemployed persons V u displaystyle V u nbsp and that of employed persons V e displaystyle V e nbsp are defined by r V e w q V u V e r V u z 8 m 8 V e V u displaystyle begin aligned rV e amp w q V u V e rV u amp z theta m theta V e V u end aligned nbsp Let w displaystyle w nbsp be the wage r displaystyle r nbsp the interest rate z displaystyle z nbsp the instantaneous income of unemployed persons q displaystyle q nbsp the exogenous job destruction rate 8 displaystyle theta nbsp the labor market tightness and 8 m 8 displaystyle theta m theta nbsp the job finding rate The profits P e displaystyle Pi e nbsp and P v displaystyle Pi v nbsp expected from a filled job and a vacant one are r P e y w q P v P e r P v h m 8 P e P v displaystyle r Pi e y w q Pi v Pi e quad r Pi v h m theta Pi e Pi v nbsp where h displaystyle h nbsp is the cost of a vacant job and y displaystyle y nbsp is the productivity When the free entry condition P v 0 displaystyle Pi v 0 nbsp is satisfied these two equalities yield the following relationship between the wage w displaystyle w nbsp and labor market tightness 8 displaystyle theta nbsp h m 8 y w r q displaystyle h over m theta y w over r q nbsp If w displaystyle w nbsp represents a minimum wage that applies to all workers this equation completely determines the equilibrium value of the labor market tightness 8 displaystyle theta nbsp There are two conditions associated with the matching function m 8 lt 0 8 m 8 gt 0 displaystyle m theta lt 0 quad theta m theta gt 0 nbsp This implies that 8 displaystyle theta nbsp is a decreasing function of the minimum wage w displaystyle w nbsp and so is the job finding rate a 8 m 8 displaystyle alpha theta m theta nbsp 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 r V u displaystyle rV u nbsp to be r V u r q z 8 m 8 w r q 8 m 8 displaystyle rV u r q z theta m theta w over r q theta m theta nbsp Using the relationship between the wage and labor market tightness to eliminate the wage from the last equation gives us r V u 8 m 8 y r q z 8 r q h r q 8 m 8 displaystyle rV u theta m theta y r q z theta r q h over r q theta m theta nbsp By maximizing r V u displaystyle rV u nbsp in this equation with respect to the labor market tightness it follows that 1 h 8 y z r q h 8 8 m 8 h m 8 displaystyle 1 eta theta y z over r q eta theta theta m theta h over m theta nbsp where h 8 displaystyle eta theta nbsp is the elasticity of the matching function h 8 8 m 8 m 8 8 d d 8 log m 8 displaystyle eta theta theta m theta over m theta equiv theta d over d theta log m theta nbsp 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 h 8 displaystyle eta theta nbsp The level of the negotiated wage is w displaystyle w nbsp If w lt w displaystyle w lt w nbsp 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 h 8 displaystyle eta theta nbsp an increase 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 h 8 displaystyle eta theta nbsp On the other hand if w w displaystyle w geq w nbsp any increases in the minimum wage entails a decline in labor market participation and an increase in unemployment Job search effort edit This section may be too technical for most readers to understand Please help improve it to make it understandable to non experts without removing the technical details September 2022 Learn how and when to remove this template message In the model just presented the minimum wage always increases unemployment This result does not necessarily hold when the search effort of workers is endogenous Consider a model where the intensity of the job search is designated by the scalar ϵ displaystyle epsilon nbsp 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 a ϵ displaystyle alpha epsilon nbsp and that the wage distribution is degenerated to a single wage w displaystyle w nbsp Denote f ϵ displaystyle varphi epsilon nbsp to be the cost arising from the search effort with f gt 0 f gt 0 displaystyle varphi gt 0 varphi gt 0 nbsp Then the discounted utilities are given by r V e w q V u V e r V u max ϵ z f ϵ a ϵ V e V u displaystyle begin aligned rV e amp w q V u V e rV u amp max epsilon z varphi epsilon alpha epsilon V e V u end aligned nbsp Therefore the optimal search effort is such that the marginal cost of performing the search is equation to the marginal return f ϵ a V e V u displaystyle varphi epsilon alpha V e V u nbsp 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 ϵ z f ϵ a ϵ V e V u displaystyle r q V e V u w max epsilon left z varphi epsilon alpha epsilon V e V u right nbsp Then differentiating with respect to w displaystyle w nbsp and rearranging gives us d d w V e V u 1 r q a ϵ gt 0 displaystyle d over dw V e V u 1 over r q alpha epsilon gt 0 nbsp where ϵ displaystyle epsilon nbsp 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 displaystyle u nbsp at equilibrium is given by u q q a ϵ displaystyle u q over q alpha epsilon nbsp 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 edit nbsp 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 61 This section may be too long to read and navigate comfortably Please consider splitting content into sub articles condensing it or adding subheadings Please discuss this issue on the article s talk page January 2024 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 19 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 trainingUntil 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 13 In addition to the basic supply demand intuition there were a number of empirical studies that supported this view For example Edward Gramlich in 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 62 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 63 nbsp CBO table illustrating projections of the effects of minimum wage increases on employment and income under two scenariosWellington 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 64 Some research suggests that the unemployment effects of small minimum wage increases are dominated by other factors 65 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 66 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 67 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 68 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 tradable sectors defined as those sectors most reliant on entry level or low skilled labor 69 A 2018 study published by the university of California agrees with the study in the quarterly journal of economics and discusses how minimum wages actually cause fewer jobs for low skilled workers Within the article it discusses a trade off for low to high skilled workers that when the minimum wage is increased GDP is more highly redistributed to high academia jobs 70 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 71 A 2013 study published in the Science direct journal agrees with the studies above as it describes that there is not a significant employment change due to increases in minimum wage The study illustrates that there is not a lot of national generalisability for minimum wage effects studies done on one country often get generalised to others Effect on employment can be low from minimum wage policies but these policies can also benefit welfare and poverty 72 David Card and Alan Krueger edit 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 73 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 73 Card and Krueger expanded on this initial article in their 1995 book Myth and Measurement The New Economics of the Minimum Wage 74 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 75 Research after Card s and Krueger s work edit nbsp 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 76 In 1996 David Neumark and William Wascher reexamined Card s and Krueger s results 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 77 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 78 Neumark and Wascher s conclusions were subsequently rebutted in a 2000 paper by Card and Krueger 79 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 80 A 2014 analysis based on panel data found that the minimum wage reduces employment among teenagers 81 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 82 Further application of the methodology used by Card and Krueger by other researchers yielded results similar to their original findings across additional data sets 83 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 83 84 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 85 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 86 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 87 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 88 This study by Meer and West was later critiqued for its trends of assumption in the context of narrowly defined low wage groups 89 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 89 90 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 91 Another 2013 study by Suzana Laporsek of the University of Primorska on youth unemployment in Europe claimed there was a negative statistically significant impact of minimum wage on youth employment 92 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 93 94 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 95 Finally 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 96 In 2019 economists from the Georgia Institute of Technology published a study that found a strong correlation between increases to the minimum wage and detectable harm to the financial conditions of small businesses including a higher rate of bankruptcy lower hiring rates lower credit scores and higher interest payments The researchers noted that these small businesses were also correlated with minority ownership and minority customer bases 97 In July 2019 the United States Congressional Budget Office published the impact on proposed national 15 per hour legislation It noted that workers who retained full employment would see a modest improvement in take home pay offset by a small decrease in working conditions and non pecuniary benefits However this benefit is offset by three primary factors the reduction in hours worked the reduction in total employment and the increased cost of goods and services Those factors result in a decrease of about 33 billion in total income and nearly 1 7 3 7 million lost jobs in the first three years the CBO also noted this figure increases over time 98 In response to an April 2016 Council of Economic Advisers CEA report advocating the raising of the minimum wage to deter crime economists used data from the 1998 2016 Uniform Crime Reports UCR National Incident Based Reporting System NIBRS and National Longitudinal Study of Youth NLSY to assess the impact of the minimum wage on crime They found that increasing the minimum wage resulted in increased property crime arrests among those ages 16 to 24 They estimated that an increase of the Federal minimum wage to 15 hour would generate criminal externality costs of nearly 2 4 billion 99 Economists in Denmark relying on a discontinuity in wage rates when a worker turns 18 found that employment fell by 33 and total hours fell by 45 when the minimum wage law was in effect 100 According to the 2021 study The Effects of Minimum Wage on Employment New Evidences for Spain 101 102 by the Bank of Spain the sudden increase of minimum wage in Spain in 2019 by 22 from 860 EUR month to 1050 EUR month projected to 12 annual payments destroyed between 98 000 and 180 000 jobs which corresponds to between 6 and 11 of jobs remunerated at minimum wage A 2021 study Reallocation Effects of the Minimum Wage in the Quarterly Journal of Economics found that the introduction of a nationwide minimum wage in Germany 8 50 EUR hour caused an increase in wages without leading to a reduction in employment However authors found that the lack of employment responses masks some important structural shifts in the economy the minimum wage led to a reallocation of workers from smaller to larger from lower paying to higher paying and from less to more productive establishments Some small businesses had to exit the market thus leading to an increment of market concentration and reduced competition among firms in the product market which can lead to higher prices The study also found that the reallocation of low wage workers to higher paying establishments came at the expense of increased commuting time which might have left some workers worse off despite earning a higher wage 103 A 2010 work studied the effect of the UK minimum wage on prices The minimum wage did not cause prices to rise faster than normal in the months following an increase But in the longer term sectors with many such workers a saw prices rise faster than other sectors especially in the four years after the introduction of the minimum wage 104 A 2012 UK study on the minimum wage from 1997 2007 found it led to reduced wage inequality and had positive to neutral effects on employment levels 105 A 2012 UK study found no evidence of spill over effects from the minimum wage Analysing 1998 2008 wage brackets increases in the minimum wage did not cause increases in higher earning brackets and this was consistently found despite any changes to the model parameters b 106 A 2016 US study on the 1979 2012 minimum wage found it was associated with reductions in wage inequality It also indicates spill over effects to higher earning brackets though it states this may be due to measurement error 107 Meta analyses edit In 2013 a meta analysis of 16 UK studies found no significant effects on employment attributable to the minimum wage 108 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 109 A 2019 meta analysis of developed countries reported a very muted effect of minimum wages on employment while significantly increasing the earnings of low paid workers 110 Publication bias amongst meta analyses 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 111 Though a serious methodological indictment opponents of the minimum wage largely ignored this issue as Thomas Leonard noted The silence is fairly deafening 112 In 2005 T D Stanley showed that Card s 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 113 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 114 Debate over consequences edit nbsp Protesters in the United States call for an increased minimum wage as part of the Fight for 15 movement to require a US 15 per hour minimum wage 2015Minimum wage laws affect workers in most low paid fields of employment 19 and have usually been judged against the criterion of reducing poverty 115 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 19 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 116 117 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 34 Studies have found that minimum wages have the following positive effects Improves functioning of the low wage labor market which may be characterized by employer side market power monopsony 118 119 Raises family incomes at the bottom of the income distribution and lowers poverty 120 121 Positive impact on small business owners and industry 122 Encourages education 123 resulting in better paying jobs 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 124 Increased job growth and creation 125 126 Encourages efficiency and automation of industry 127 Removes low paying jobs forcing workers to train for and move to higher paying jobs 128 129 Increases technological development Costly technology that increases business efficiency is more appealing as the price of labor increases 130 Encourages people to join the workforce rather than pursuing money through illegal means e g selling illegal drugs 131 Studies have found the following negative effects Minimum wage alone is not effective at alleviating poverty and in fact produces a net increase in poverty due to disemployment effects 132 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 133 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 134 135 Wage price spiral Encourages employers to replace low skilled workers with computers such as self checkout machines 136 Increases property crime and misery in poor communities by decreasing legal markets of production and consumption in those communities 137 Can result in the exclusion of certain groups ethnic gender etc from the labor force 138 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 139 Discourages further education among the poor by enticing people to enter the job market 139 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 11 Slows growth in the creation of low skilled jobs 88 Results in jobs moving to other areas or countries which allow lower cost labor 140 Results in higher long term unemployment 141 Results in higher prices for consumers where products and services are produced by minimum wage workers 142 though non labor costs represent a greater proportion of costs to consumers in industries like fast food and discount retail 143 144 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 115 That may be seen as a legal violation of human right to work in its most basic interpretation as a right to engage in productive employment and not to be prevented from doing so 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 2 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 145 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 146 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 147 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 148 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 149 The Institute for the Study of Labor found prices in minimum wage sectors c rose faster than other sectors especially in the four years after its introduction 104 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 125 150 151 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 125 152 153 154 155 156 157 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 158 However subsequently at least two of the business owners quoted did expand 159 160 With 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 161 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 162 A 2019 study published in the American Journal of Preventive Medicine showed that in the United States those states that 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 163 According to a 2020 US study the cost of 10 minimum wage increases for grocery store workers was fully passed through to consumers as 0 4 higher grocery prices 164 Similarly a 2021 study that covered 10 000 McDonald s restaurants in the US found that between 2016 and 2020 the cost of 10 minimum wage increases for McDonald s workers were passed through to customers as 1 4 increases in the price of a Big Mac 165 166 This results in minimum wage workers getting a lesser increase in their real wage than in their nominal wage because any goods and services they purchase made with minimum wage labor have now increased in cost analogous to an increase in the sales tax 167 According to a 2019 review of the academic literature by Arindrajit Dube overall the most up to date body of research from US UK and other developed countries points to a very muted effect of minimum wages on employment while significantly increasing the earnings of low paid workers 110 According to a 2021 study The Minimum Wage EITC and Criminal Recidivism a minimum wage increase of 0 50 reduces the probability an ex incarcerated individual returns to prison within 3 years by 2 15 these reductions come mainly from recidivism of property and drug crimes 168 Surveys of economists editThere used to be agreement among economists that the minimum wage adversely affected employment but that consensus shifted in the early 1990s due to new research findings According to one 2021 assessment there is no consensus on the employment effects of the minimum wage 169 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 170 By 1992 the survey found 79 of economists in agreement with that statement 171 and by 2000 46 were in full agreement with the statement and 28 agreed with provisos 74 total 172 173 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 174 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 175 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 176 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 177 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 178 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 178 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 179 Alternatives editEconomists 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 edit Main article 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 United States show that people spent more time studying while the program which was running 180 need quotation to verify 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 Guaranteed minimum income edit 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 181 Refundable tax credit edit 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 182 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 183 The federal EITC program has been expanded by a number of presidents including Jimmy Carter Ronald Reagan George H W Bush and Bill Clinton 184 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 185 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 186 The Adam Smith Institute prefers cutting taxes on the poor and middle class instead of raising wages as an alternative to the minimum wage 187 Collective bargaining edit Italy Sweden Norway Finland and Denmark are developed nations where legislation stipulates no minimum wage 26 28 Instead minimum wage standards in different sectors are set by collective bargaining 188 Particularly the Scandinavian countries have very high union participation rates 189 Wage subsidies edit Some economists such as Scott Sumner 190 and Edmund Phelps 191 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 192 193 Wage subsidies lack political support from either major political party in the United States 194 195 Education and training edit 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 196 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 197 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 By country editFurther information List of countries by minimum wage Armenia edit The concept of the national minimum wage emerged in Armenia in 1995 Since then it has been increasing on average every couple of years The longest unchanged streak of the national minimum wage was between 1999 and 2003 when it was set at 5 000 AMD and between 2015 and 2019 where it was set at 55 000 AMD In November 2022 the national minimum wage was subject to the latest increase It was set at 75 000 AMD 198 199 Lebanon edit After two years of constant financial meltdown Lebanon as of 2021 is ranking as one of the 10 countries in the world with the lowest minimum wages because of the collapse of the local pound following the Lebanese financial crisis that started in August 2019 200 The minimum monthly wage set at LBP 675 000 which valued USD 450 prior to the crisis is barely reaching USD 30 nowadays 201 The currency has lost nearly 90 of its value and drove three quarters of residents into poverty 202 Article 44 of the Lebanese Code of Labor states that the minimum pay must be sufficient to meet the essential needs of the wage earner or salary earner and his family and according to Article 46 the minimum pay assessed shall be rectified whenever economic circumstances render such review necessary 203 Republic of Ireland edit The national minimum wage was introduced in the Republic of Ireland in April 2000 Prior to this minimum wages were set by industry specific Joint Labour Committees However coverage for workers was low and the agreements were poorly enforced and moreover those who were covered by agreements received low wages As of April 2000 the government introduced a national minimum wage of 5 58 per hour The minimum wage increased regularly in the period from 2000 to 2007 and reached 8 65 per hour in July 2007 As the global economic downturn hit the country in 2008 there was no further wage increases until 2016 when the minimum wage was increased to 9 15 Before the 2019 there existed specific categories of employees that earned sub minimum wage rates expressed as a percentage of the full rate of pay Employees under the age of 18 were eligible to earn 70 per cent of the minimum wage employees in the first year of employment were eligible to earn 80 per cent employees in the second year of full employment were eligible to earn 90 per cent and employees in structured training during working hours were eligible to earn 75 80 or 90 per cent depending on their level of progression This framework has since been abolished in place of a framework based on the age of the employee 204 As of 1 January 2022 the minimum wage is 10 50 Those aged 20 and over are eligible to receive 100 percent of the minimum wage Those under the age of 18 are eligible to receive 70 percent of the minimum wage those aged 18 are eligible to receive 80 percent of the minimum wage and those aged 19 are eligible receive 90 percent of the minimum wage 205 South Korea edit This section is an excerpt from Minimum wage in South Korea edit nbsp Minimum wage in South Korea with terms of presidentsThe South Korean government enacted the Minimum Wage Act on December 31 1986 The Minimum Wage System began on January 1 1988 At this time the economy was booming 206 and the minimum wage set by the government was less than 30 percent of that of real workers The Minister of Employment and Labor in Korea asks the Minimum Wage Commission to review the minimum wage by March 31 every year The Minimum Wage Commission must submit the minimum wage bill within 90 days after the request has been received by the 27 committee members If there is no objection the new minimum wage will then take effect from January 1 The minimum wage committee decided to raise the minimum wage in 2018 by 16 4 from the previous year to 7 530 won US 7 03 per hour This is the largest increase since 2001 when it was increased by 16 8 However the government officially admitted that the policy of raising the minimum wage to 10 000 won by 2020 which had been the initial target but which the government had been forced to forego had also caused a great burden on self employed businesses and deteriorated the job market 207 In addition there are opinions from various media that the minimum wage law is not properly applied in Korea 208 209 Spain edit The Spanish government sets the Interprofessional Minimum Wage SMI annually after consulting with the most representative trade unions and business associations for both permanent and temporary workers as well as for domestic employees It takes into account the consumer price index national average productivity the increase in labor s share in national income and the general economic situation 210 211 The SMI can be revised semi annually if the government s predictions about the consumer price index are not met The amount set is a minimum wage so it can be exceeded by a collective agreement or individual agreement with the company The revision of the SMI does not affect the structure or amount of professional salaries being paid to workers when they are superior to the established minimum wage Finally the amount of the SMI is non seizable The minimum wage was introduced in Spain in 1963 through Decree 55 1963 proposed by Jesus Romeo Gorria the Minister of Labor during Francisco Franco s IX Government The purpose was to ensure fair remuneration for all workers adjusting wages to labor and economic conditions and advocating for salary equity It was set at 1 800 pesetas month 25 200 pesetas year 12 monthly payments plus 2 extra payments as its customary in Spain as to this day equivalent to 10 80 euros at the time but only 400 euros in today s prices In the years following Franco s death in 1975 the minimum wage gradually increased reaching 50 49 euros 8 400 pesetas that year which is equivalent to 657 23 euros in today s currency 212 Over the years the minimum wage continued to rise with several revisions along the way In 2022 the Spanish government set the minimum wage at 33 33 euros per day or 1 000 euros per month effective from January 1 This represents a 47 increase from the previous minimum wage set in 2018 at 735 90 euros 213 There are several debates around the minimum wage in Spain which focus on its impact on employment and inflation While some argue that increasing the minimum wage can be a useful tool to increase the incomes of low income families and reduce poverty others have doubts about its effectiveness in achieving these goals For instance an analysis conducted by BCE Central Bank of Spain by its initials in spanish in 2019 on the impact of the 2017 increase in the minimum wage showed a negative effect on the probability of maintaining employment among affected workers which was particularly significant for older workers 214 Additionally the 2022 raise of the minimum wage revived the debate about the relationship between inflation and the SMI with some arguing that the increase in the minimum wage could potentially contribute to inflation The debate centres on whether it s a useful tool to help maintain the purchasing power of those who retain their jobs or it s not effective because it adds pressure to the growth of prices and increase the likelihood of inflation becoming entrenched 215 United States edit Main article Minimum wage in the United States This section is an excerpt from Minimum wage in the United States edit nbsp Minimum wage by U S state Washington D C and territory In states with lower or no minimum wage federal rates apply to workers covered by the Fair Labor Standards Act 216 Special minimum wages apply to some workers in American Samoa 217 218 No minimum wage Lower state minimum wage than federal Same state minimum wage as federal Higher state minimum wage than federal Special rules American Samoa only nbsp Minimum wage by state by yearIn the United States the minimum wage is set by U S labor law and a range of state and local laws 219 The first federal minimum wage was instituted in the National Industrial Recovery Act of 1933 signed into law by President Franklin D Roosevelt but later found to be unconstitutional 220 In 1938 the Fair Labor Standards Act established it at 25 an hour 5 20 in 2022 221 Its purchasing power peaked in 1968 at 1 60 13 00 in 2022 221 222 223 In 2009 it was increased to 7 25 per hour and has not been increased since 224 Employers have to pay workers the highest minimum wage of those prescribed by federal state and local laws In August 2022 30 states and the District of Columbia had minimum wages higher than the federal minimum 225 In January 2020 almost 90 of Americans earning just minimum wage got more than 7 25 an hour 226 The effective nationwide minimum wage the wage that the average minimum wage worker earns was 11 80 in May 2019 this was the highest it had been since at least 1994 the earliest year for which effective minimum wage data are available 227 In 2021 the Congressional Budget Office estimated that incrementally raising the federal minimum wage to 15 an hour by 2025 would benefit 17 million workers but would also reduce employment by 1 4 million people 228 229 It would also lift about 900 000 people out of poverty and might raise wages for 10 million more workers cause prices to rise and overall economic output to decrease slightly and increase the federal budget deficit by 54 billion over the next 10 years 228 229 230 d An Ipsos survey in August 2020 found that support for a rise in the federal minimum wage had grown substantially during the COVID 19 pandemic with 72 of Americans in favor including 62 of Republicans and 87 of Democrats 231 A March 2021 poll by Monmouth University Polling Institute conducted as a minimum wage increase was being considered in Congress found 53 of respondents supporting an increase to 15 an hour and 45 opposed 232 In 2019 1 6 million Americans earned no more than the federal minimum wage about 1 of workers and less than 2 of those paid by the hour Less than half worked full time almost half were aged 16 25 and more than 60 worked in the leisure and hospitality industries where many workers received tips in addition to their hourly wages No significant differences existed among ethnic or racial groups women were about twice as likely as men to earn minimum wage or less 233 In May 2022 the legislature of Hawaii passed a bill to raise the minimum wage to 18 by 2028 the highest state minimum wage in the United States 234 Governor David Ige signed the bill the next month 235 Australia edit In Australia the Fair Work Commission FWC is responsible for determining and setting a national minimum wage as well as the minimum wages in awards setting wage rates for particular occupations and industries The Fair Work Act 2009 establishes an Expert panel tasked with providing and maintaining a safety net of a fair minimum wage The Expert panel is made up of the president of the panel three full time commission members and three part time commission members All members must have experience in workplace relations economics social policy or business industry and commerce and can inform its decision making through commissioning a range of economic and social research 236 The legislative framework requires that in setting minimum wages the Expert Panel is required to take into account the current state of the economy including inflation business competitiveness productivity and employment growth In addition the Expert panel must also consider the social goals of the promotion of social inclusion the standard of living of the low paid equal remuneration for work of equal or comparable value and reasonable wages for junior employees employees whose jobs have training requirements and employees with disability 237 See Fair Work Act 2009 for more information The Expert panel conducts yearly wage reviews to determine if the minimum wage needs to be adjusted based on the economy s current and projected performance The annual minimum wage review decisions in 2016 17 found based on research tendered and submissions to the review that moderate increases to minimum wages do not inhibit workplace participation or result in disemployment This position was carried over to the 2017 18 and 2018 19 decisions 237 and informed the decisions including the 2018 19 decision which delivered a minimum wage increase of 3 when the corresponding headline rate of inflation was 1 3 238 In the annual minimum wage review decisions of 2019 20 and 2020 21 the FWC was considerably more constrained in setting minimum wages due to uncertain economic conditions during the COVID 19 pandemic and the 2020 21 decision noted the uncertainty of the impact of increases in the minimum wages for youth employment 239 See also edit nbsp Business and Economics portal nbsp Capitalism portalAverage worker s wage Economic inequality Employee benefits Family wage Garcia v San Antonio Metropolitan Transit Authority Labor law Minimum Wage Fixing Convention 1970 Negative and positive rights Price controls Salary cap Scratch Beginnings Thomas Sowell Walter E Williams Working poorNotes edit Notably take away foods canteen meals hotel services and domestic services No spill over effects were found even after looking at only people who moved jobs and so were able to negotiate a new salary using wider brackets bracketing in pence instead of percentages and splitting the groups by gender notably take away foods canteen meals hotel services and domestic services See the section on Employment for more detailed findings from this study including employment estimates on raising the wage to 10 or 12 per hour References edit Real minimum wages from the Organisation for Economic Co operation and 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Williams Walter 1989 South Africa s War Against Capitalism New York Praeger ISBN 978 0 275 93179 7 a b A blunt instrument The Economist ISSN 0013 0613 Retrieved 14 February 2023 Pros amp Cons of Outsourcing Manufacturing Jobs smallbusiness chron com Retrieved 24 April 2019 Partridge M D Partridge J S 1999 Do minimum wage hikes reduce employment State level evidence from the low wage retail sector Journal of Labor Research 20 3 393 doi 10 1007 s12122 999 1007 9 S2CID 154560481 The Effects of a Minimum Wage Increase on Employment and Family Income 18 February 2014 Archived from the original on 25 July 2014 Retrieved 26 July 2014 Covert Bryce 21 February 2014 A 10 10 Minimum Wage Would Make A DVD At Walmart Cost One Cent More ThinkProgress Archived from the original on 29 July 2014 Hoium Travis 19 October 2016 What Will a Minimum Wage Increase Cost You at McDonald s The Motley Fool Archived from the original on 23 July 2014 Scarpetta Stephano Anne Sonnet and Thomas Manfredi Rising Youth 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Today Archived from the original on 11 July 2017 Stilwell Victoria 8 March 2014 Highest Minimum Wage State Washington Beats U S in Job Creation Bloomberg Archived from the original on 10 January 2015 Lobosco Katie 14 May 2014 Washington state defies minimum wage logic CNN Archived from the original on 25 October 2014 Did Washington State s Minimum Wage Bet Pay Off International Business Times 5 March 2014 Archived from the original on 20 November 2014 Meyerson Harold 21 May 2014 Harold Meyerson A higher minimum wage may actually boost job creation The Washington Post Archived from the original on 18 July 2017 Covert Bryce 3 July 2014 States That Raised Their Minimum Wages Are Experiencing Faster Job Growth ThinkProgress Archived from the original on 25 October 2014 Nellis Mike Minimum Wage Question and Answer Archived from the original on 25 October 2014 Wang Deborah 24 October 2018 Minimum Wage Limbo Keeps Small Business Owners Up At Night kuow org Retrieved 14 February 2023 Seattle Magazine March 23 2015 Archived from the original on 25 February 2021 Retrieved 1 February 2016 15 minimum wage a surprising success for Seattle restaurant Archived 26 July 2016 at the Wayback Machine KOMO News 31 July 2015 C Eisenring Dec 2015 Gefahrliche Mindestlohn Euphorie Archived 1 January 2016 at the Wayback Machine in German Neue Zurcher Zeitung Retrieved 30 December 2015 Janssen R September 2015 The German Minimum Wage Is Not A Job Killer Social Europe Archived from the original on 9 November 2015 Retrieved 30 December 2015 Rapaport Lisa 19 April 2019 Higher state minimum wage tied to lower suicide rates Reuters Retrieved 27 April 2019 Renkin Tobias Montialoux Claire Siegenthaler Michael 30 October 2020 The Pass Through of Minimum Wages into US Retail Prices Evidence from Supermarket Scanner Data The Review of Economics and Statistics 104 5 890 908 doi 10 1162 rest a 00981 hdl 20 500 11850 448658 ISSN 0034 6535 S2CID 202621766 This paper estimates the pass through of minimum wage increases into the prices of US grocery and drug stores We use high frequency scanner data and leverage a large number of state level increases in minimum wages between 2001 and 2012 We find that a 10 minimum wage hike translates into a 0 36 increase in the prices of grocery products This magnitude is consistent with a full pass through of cost increases into consumer prices We show that price adjustments occur mostly in the three months following the passage of minimum wage legislation rather than after implementation suggesting that pricing of groceries is forward looking Ashenfelter Orley Jurajda Stepan 1 January 2021 Wages Minimum Wages and Price Pass Through The Case of McDonald s Restaurants PDF Retrieved 3 February 2021 We use highly consistent national coverage price and wage data to provide evidence on wage increases labor saving technology introduction and price pass through by a large low wage employer facing minimum wage hikes Based on 2016 2020 hourly wage rates of McDonald s Basic Crew and prices of the Big Mac sandwich collected simultaneously from almost all US McDonald s restaurants we find that in about 25 of instances of minimum wage increases restaurants display a tendency to keep constant their wage premium above the increasing minimum wage Higher minimum wages are not associated with faster adoption of touch screen ordering and there is near full price pass through of minimum wages with little heterogeneity related to how binding minimum wage increases are for restaurants Minimum wage hikes lead to increases in real wages expressed in Big Macs an hour of Basic Crew work can buy that are one fifth lower than the corresponding increases in nominal wages Buchwald Elisabeth 30 January 2021 What minimum wage increases did to McDonald s restaurants and their employees MarketWatch They found that the higher cost of labor that results from increasing minimum wages gets passed on to consumers in the form of more expensive Big Macs More specifically they estimated that a 10 minimum wage increase leads to a 1 4 increase in the price of a Big Mac Rosalsky Greg 16 February 2021 What McDonald s Shows About The Minimum Wage NPR Ashenfelter says the evidence from increased food prices suggests that basically all of the increase of labor costs gets passed right on to the customers But because low wage workers are also usually customers at low wage establishments this suggests that any pay raise resulting from a minimum wage increase might not be as great in reality as it looks on paper In econospeak the increase in their real wage that is their wage after accounting for the price of the stuff they buy is not as high because the cost of some of the stuff they buy such as fast food goes up too They still get a raise They just don t get as big a raise as it may seem he says In effect a minimum wage increase appears to be a redistribution of wealth from customers to low wage workers Ashenfelter says he thinks of it like a kind of sales tax Agan Amanda Y Makowsky Michael D 12 July 2021 The Minimum Wage EITC and Criminal Recidivism Journal of Human Resources 58 5 1712 1751 doi 10 3368 jhr 58 5 1220 11398R1 ISSN 0022 166X S2CID 239719925 Manning Alan 2021 The elusive employment effect of the minimum wage PDF Journal of Economic Perspectives 35 3 26 doi 10 1257 jep 35 1 3 ISSN 0895 3309 S2CID 156644487 Kearl J R Pope Clayne L Whiting Gordon C Wimmer Larry T May 1979 A Confusion of Economists The American Economic Review 69 2 28 37 JSTOR 1801612 Alston Richard M Kearl J R Vaughan Michael B May 1992 Is There a Consensus Among Economists in 1990s The American Economic Review 82 2 203 09 JSTOR 2117401 survey by Dan Fuller and Doris Geide Stevenson using a sample of 308 economists surveyed by the American Economic Association Hall Robert Ernest 2007 Economics Principles and Applications Centage Learning ISBN 978 1111798208 Fuller Dan Geide Stevenson Doris 2003 Consensus Among Economists Revisited Journal of Economic 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Minimum Wage rise risks harming workers cut taxes on the poor instead Press release Adam Smith Institute March 2019 Archived from the original on 13 April 2014 Retrieved 19 March 2014 Labor Criticizes Lewiston Morning Tribune Associated Press 2 March 1933 pp 1 6 Olson Parmy The Best Minimum Wages In Europe Forbes Retrieved 14 February 2023 Sumner Scott TheMoneyIllusion You can t redistribute income www themoneyillusion com Archived from the original on 11 August 2017 Retrieved 11 August 2017 Phelps Edmund S Low wage employment subsidies versus the welfare state The American Economic Review 84 2 1994 54 58 The Wage Subsidy A Better Way to Help the Poor Manhattan Institute Manhattan Institute 25 September 2015 Archived from the original on 11 August 2017 Retrieved 11 August 2017 Cass Oren 19 August 2015 A Better Wage Hike US NEWS Archived from the original on 20 August 2015 Retrieved 11 August 2017 Smith Noah 7 December 2013 Noahpinion Wage subsidies Noahpinion Archived from the original on 11 August 2017 Retrieved 11 August 2017 Drum Kevin 3 December 2013 Wage subsidies might be a good idea but Republicans will never support it Mother Jones Archived from the original on 11 August 2017 Retrieved 11 August 2017 Why Germany Is So Much Better at Training Its Workers The Atlantic 16 October 2014 Alternatives to Raising Minimum Wage Armenia Minimum wages 2022 countryeconomy com countryeconomy com Retrieved 14 February 2023 Minimum wage to rise in Armenia news am Retrieved 15 November 2022 Xinhua 26 February 2021 Lebanon ranks among countries with lowest minimum wages No 26 February 2021 Xinhua Xinhua Retrieved 16 April 2022 WION Web Team 22 November 2021 Lebanon families spending five times minimum wage on food alone WION Web Team Retrieved 16 April 2022 Goyeneche Ainhoa 21 September 2021 Lebanon s inflation rate is worse than Zimbabwe s and Venezuela s AlJazeera AlJazeera Retrieved 16 April 2022 Ramadan Tala 28 February 2021 Lebanon s average salary plummets 84 percent over 12 months AlArabiya AlArabiya Retrieved 16 April 2022 Redmond Paul May 2020 Minimum wage policy in Ireland PDF Budget Perspectives 1 2 doi 10 26504 bp202102 S2CID 218932373 No 2021 2 Retrieved 27 April 2022 Minimum rates of pay Citizens Information Retrieved 27 April 2022 U S Library of Congress The Economy Country Studies President Moon Jae in apologizes for failing to keep the promise of a minimum wage of 10 000 won Kyunghyang Newspaper 2019 Retrieved 14 July 2019 Korea s wage theft over 10 times higher than Japan s Kyunghyang Newspaper 2016 Retrieved 4 September 2016 Increasing the amount of unpaid wages in Korea edaily Newspaper 2020 Retrieved 25 January 2020 Jefatura del Estado 26 June 2004 Real Decreto ley 3 2004 de 25 de junio para la racionalizacion de la regulacion del salario minimo interprofesional y para el incremento de su cuantia pp 23466 23472 retrieved 28 April 2023 BOE A 2015 11430 Real Decreto Legislativo 2 2015 de 23 de octubre por el que se aprueba el texto refundido de la Ley del Estatuto de los Trabajadores www boe es Retrieved 28 April 2023 Asi ha evolucionado el Salario Minimo en Espana desde el franquismo hasta los 1 080 euros de 2023 www larazon es in Spanish 31 January 2023 Retrieved 28 April 2023 BOE A 2022 2851 Real Decreto 152 2022 de 22 de febrero por el que se fija el salario minimo interprofesional para 2022 www boe es Retrieved 28 April 2023 Lacuesta Gabarain A Izquierdo Peinado M Puente Diaz S 2019 Un analisis del impacto de la subida del salario minimo interprofesional en 2017 sobre la probabilidad de perder el empleo PDF Documentos Ocasionales N º 1902 via Banco de Espana Espana Luces y sombras de la subida del SMI BBVA Research www bbvaresearch com in Spanish Retrieved 28 April 2023 State Minimum Wage Laws Wage and Hour Division WHD United States Department of Labor Click on states on that map to see exact minimum wage info by state See bottom of page for District of Columbia and U S territories See table and abbreviations list Wage Rates in American Samoa Wage and Hour Division of the U S Department of Labor Wage Rate in American Samoa PDF Wage and Hour Division WHD United States Department of Labor Bradley David H 3 February 2016 State Minimum Wages An Overview PDF Washington D C Congressional Research Service Retrieved 31 January 2018 Fair Labor Standards Act of 1938 Maximum Struggle for a Minimum Wage U S Department of Labor www dol gov Retrieved 19 January 2021 a b 1634 1699 McCusker J J 1997 How Much Is That in Real Money A Historical Price Index for Use as a Deflator of Money Values in the Economy of the United States Addenda et Corrigenda PDF American Antiquarian Society 1700 1799 McCusker J J 1992 How Much Is That in Real Money A Historical Price Index for Use as a Deflator of Money Values in the Economy of the United States PDF American Antiquarian Society 1800 present Federal Reserve Bank of Minneapolis Consumer Price Index estimate 1800 Retrieved 28 May 2023 Indexing the Minimum Wage for Inflation Economic Policy Institute Retrieved 20 March 2018 Wenger Jeffrey B September 2016 a, wikipedia, wiki, book, books, library,

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