29 votes

What is the economic purpose of increasing the minimum wage?

Opinion of Economists What makes you think that economists are so aligned against the minimum wage? Take a look at the IGM Forum that polls top academic economists. There is substantial disagreement ...
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19 votes

What is the economic purpose of increasing the minimum wage?

From a purely theoretical perspective, one argument for a minimum wage would be that the majority of employees work for medium-large sized businesses and face significant personal cost from switching ...
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16 votes

What is the economic purpose of increasing the minimum wage?

The title "What is the purpose of increasing the minimum wage?" and the question "is there an economic reason as to why a higher minimum wage would benefit the economy?" while overlapping, are not ...
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9 votes
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Effect of minimum wage on higher levels of pay

This phenomenon is sometimes called "wage compression" because the range of wages is compressed by the minimum wage laws. One paper on this subject is The Impact of the Minimum Wage on Other Wages
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8 votes

Minimum Wage effects on Adjacent Cities

A very famous study in this direction is Card and Krueger (1994). They look an increase in the minimum wage in New Jersey in 1992. While New Jersey raised the minimum wage from USD 4.25/h to USD 5.05/...
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8 votes

What is the economic purpose of increasing the minimum wage?

There are two mechanisms at work. First, a minimum wage will (to the extent that it affects workers) increase disposable income for a subpopulation who have a high marginal propensity to consume (...
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8 votes

What is the economic purpose of increasing the minimum wage?

Recently there has been a lot of interest on the use of minimum wage in the literature on optimal taxation. These recent developments tend to indicate that if a government aims at redistribution, ...
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7 votes

Stimulus Effect of the Minimum Wage

From the Chicago Federal Reserve: Following a minimum wage hike, household income rises on average by about \$250 per quarter and spending by roughly \$700 per quarter for households with minimum ...
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7 votes
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What keeps minimum wage rates in balance?

How is the minimum wage determined? Yes and no. It is a political choice, but with economic reasoning. In the end, that's the case for every economic rule, maybe with the exception of monetary rules, ...
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6 votes
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Minimum wage vs wage subsdies

We could distinguish between two kinds of "wage subsidies": A) The government pays to the firm part of the wage cost, usually social security fees. B) The government pays to the employee a markup ...
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5 votes
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What would happen if layoffs were made illegal?

We can infer from what happens in countries where layoffs are difficult, e.g. France. There employees are (or at least were) harrassed to quit instead. There's a practice in France called being sent ...
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4 votes

What is the economic purpose of increasing the minimum wage?

Another argument is that, in the long run, it promotes productivity, technology and I+D. Without a minimum wage your economy will tend to turn into a new Bangladesh. It will attract low tech ...
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4 votes

What is the economic purpose of increasing the minimum wage?

One point to mention is when you increase the purchasing power of the poorest they will use it on spending and thus boost the local economy (shops, repairs, plumbers etc). Wealthy people have more ...
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3 votes
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Minimum Wage effects on Adjacent Cities

You should look at this county pairing methodology used by Dube, Lester and Reich (2010). http://escholarship.org/uc/item/86w5m90m The abstract: We use policy discontinuities at state borders to ...
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3 votes
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How is it traditionally defined the minimum wage legislation in economics?

It depends. Some countries use hourly wage (Australia, Morocco, UK, US), other use daily (Mexico), other monthly (Argentina, Brazil, Chile, Colombia, France, Peru, Spain), others annually (Bolivia). (...
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3 votes

Effect of minimum wage on higher levels of pay

There actually is empirical evidence that raising the minimum wage raises a range of wages that are close to, but above the minimum wage. The effect begins to fade as you go up the wage scale, so ...
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3 votes
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Should minimum wage be regulated for developing countries

A welfare or efficiency enhancing minimum wage can be justified in several theoretical settings. For example, if there is monopsony (a single employer), the employer can internalize the effect of his ...
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3 votes

What keeps minimum wage rates in balance?

While business owners are generally united in their stance against minimum wage increases, wage earners do not always prefer a wage increase. Minimum wage puts pressure on the least productive workers ...
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3 votes
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Empirical Data on Demand for Minimum-Wage Jobs in the USA

Neumark and Wascher have a paper that surveys recent empirical work on the effects of the minimum wage in detail. It includes a number of tables that nicely summarise the results of a large number (...
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3 votes
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Minimum wages - what is the effect?

I will focus on academic literature reviews since they tend to be unbiased (or at least less biased) - academic literature reviews are often accessible even to non-specialists as they usually do not ...
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3 votes
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Advice on method for analyzing the effects of increase in minimum wage

The output from the model you mention would be not accurate at all for several reasons, including amongst other reasosns: Your post you mention you want to use labor costs as predictable variable - ...
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2 votes

Effect of minimum wage on higher levels of pay

Dube et. al. have a recent paper that documents this fact in payroll data from a US retailer. Another paper looking at this but with a less clear answer is Autor et. al. 2016.
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2 votes
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In a context of globalisation and high wage inequality, why should governments help unskilled workers?

After the exchange in comments, the OP appears to ask "why government intervention if the market will take care of the situation?" Well we know that government intervention is advised when markets "...
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2 votes
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Are there any general rules that can be used to assess the consequences of a significant minimum wage increase in a country's economy?

The only few soft general rules when it comes to minimum wages. The higher they get relative to median wage in the economy the higher the probability the utility cost of minimum wages imposed by ...
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1 vote
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How can two countries of roughly the same size, population and GDP have such big differences in minimum wage?

The minimum wage is usually the outcome of a bargaining process between the government, businesses (via lobby), and the trade unions. As such, a key driver of the final outcome depends on the balance ...
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1 vote
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How to determine the cost of a good

While you're on the right track, minimum wage is not the best way to get at it. What you're discussing is called "real wages", and it is usually calculated based on some average wage, as many workers ...
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1 vote

How inflationary is progressive taxation?

Taxation is deflationary. It's fiscal tightening. It reduces aggregate demand. (You didn't mention government spending in the question, so I've assumed it's flat). Inflation is an increasing amount ...
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1 vote

How inflationary is progressive taxation?

This is almost a link only answer, but you are asking for peer reviewed sources in the comments. Brian Romanchuk's statement that taxes are anti-inflationary also appears. (Attributed to '...
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1 vote

What's a product that historically has always had the same value, and probably will in the future?

No, there is no such product. "Value" is a historical construct; it only exists where products are made to be sold as commodities. When there was no production of commodities, products had no value. ...
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1 vote

Instrumental Variable Paper for Minimum Wage

Neumark and Wascher did a lot of work on the minimum wage in the 90s and 00s, including their 1992 piece "Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws". A ...
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