Beruflich Dokumente
Kultur Dokumente
eectively xed wages to the price of food. As the centuries 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.[5]
ECONOMICS MODELS
3.1
3.1
3
rates, will be unable to nd work. They will
be pushed into the ranks of the unemployed or
out of the labor force. Some argue that by increasing the federal minimum wage, however,
the economy will be adversely aected due to
small businesses not being able to keep up with
the need to subsequently increase all workers
wages.[38][39]
The textbook illustrates the point with a supply and demand diagram similar to the one above. In the diagram
it is assumed that workers are willing to labor for more
hours if paid a higher wage. Economists graph this relationship with the wage on the vertical axis and the quantity (hours) of labor supplied on the horizontal axis. Since
According to the supply and demand model shown in higher wages increase the quantity supplied, the supply of
and is shown as a line movmany textbooks on economics, increasing the mini- labor curve is upward sloping,
[42]
ing
up
and
to
the
right.
mum wage decreases the employment of minimum-wage
workers.[36] One such textbook says:
A rms cost is a function of the wage rate. It is assumed
that the higher the wage, the fewer hours an employer will
demand of an employee. This is because, as the wage rate
If a higher minimum wage increases the
rises, it becomes more expensive for rms to hire workers
wage rates of unskilled workers above the level
and so rms hire fewer workers (or hire them for fewer
that would be established by market forces, the
hours). The demand of labor curve is therefore shown as
quantity of unskilled workers employed will
a line moving down and to the right.[42]
fall. The minimum wage will price the services
of the least productive (and therefore lowestwage) 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. This is known
as the ripple eect. The ripple eect shows
that when you increase the minimum wage the
wages of all others will consequently increase
due the need for relativity.[37] Others, particularly those with the lowest prelegislation wage
Combining the demand and supply curves for labor allows us to examine the eect of the minimum wage. We
will start by assuming that the supply and demand curves
for labor will not change as a result of raising the minimum wage. This assumption has been questioned.[43] If
no minimum wage is in place, workers and employers will
continue to adjust the quantity of labor supplied according to price until the quantity of labor demanded is equal
to the quantity of labor supplied, reaching equilibrium
price, where the supply and demand curves intersect.
Minimum wage behaves as a classical price oor on la-
ECONOMICS MODELS
bor. 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]
In other words, the simplest and most basic economics
says this about commodities like labor (and wheat, for
example): Articially raising the price of the commodity tends to cause the supply of it to increase and the demand for it to lessen. 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.[23]
So the basic theory says that raising the minimum wage
helps workers whose wages are raised, and hurts people
who are not hired (or lose their jobs) because companies
cut back on employment. But proponents of the minimum wage hold that the situation is much more complicated than the basic theory 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 rms.[44]
3.2
The argument that a minimum wage decreases employment is based on a simple supply and demand model
of the labor market. A number of economists (for example Pierangelo Garegnani,[46] Robert L. Vienneau,[47]
and Arrigo Opocher & Ian Steedman[48] ), building on
the work of Piero Sraa, argue that that model, even
given all its assumptions, is logically incoherent. Michael
Anyadike-Danes and Wynne Godley[49] argue, based
on simulation results, that little of the empirical work
done with the textbook model constitutes a potentially
falsiable theory, and consequently empirical evidence
hardly exists for that model. Graham White[50] argues,
partially on the basis of Sraanism, that the policy of increased labor market exibility, including the reduction
of minimum wages, does not have an intellectually coherent argument in economic theory.
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 denitely do not carry
over to the two-sector case. Therefore, since a noncovered sector exists nearly everywhere, the predictions
of the textbook model simply cannot be relied on.[51]
An alternate view of the labor market has low-wage
labor markets characterized as monopsonistic competition wherein buyers (employers) have signicantly 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.[1] 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
5
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.[52] This view emphasizes the role of minimum
wages as a market regulation policy akin to antitrust poliEstimated minimum wage eects on employment from a metacies, as opposed to an illusory "free lunch" for low-wage study of 64 other studies showed insignicant employment eect
workers.
(both practically and statistically) from minimum-wage raises.
clustered at or near zero
Another reason minimum wage may not aect employ- The most precise estimates were heavily
[56]
ment in certain industries is that the demand for the prod- employment eects (elasticity = 0).
uct the employees produce is highly inelastic.[53] For example, if management is forced to increase wages, man Eects on the distribution of incomes among lowagement can pass on the increase in wage to consumers in
income and higher-income families
the form of higher prices. Since demand for the product
Eects on the skills of workers through job training
is highly inelastic, consumers continue to buy the product
and the deferring of work to acquire education
at the higher price and so the manager is not forced to lay
o workers. Economist Paul Krugman argues this expla Eects on prices and prots
nation neglects to explain why the rm was not charging
[54]
this higher price absent the minimum wage.
Eects on on-the-job training
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 businesss 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 ndings and
still be a card-carrying economist.[55]
Empirical studies
Economists disagree as to the measurable impact of minimum wages in the 'real world'. 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 dier from the eciency
that models of perfect competition predict.
Economists have done empirical studies on dierent aspects of the minimum wage, including:[10]
Employment eects, the most frequently studied aspect
Eects on the distribution of wages and earnings
among low-paid and higher-paid workers
4 EMPIRICAL STUDIES
rate. The study also found a small, but statistically sig- federal or state minimum wages, others see a small one,
nicant, increase in unemployment for adults aged 20 but none nds any serious damage. ... High minimum
24.[58]
wages, however, particularly in rigid labour markets, do
appear to hit employment. France has the rich worlds
highest wage oor, 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 24year-olds.[65]
Some empirical studies have tried to ascertain the benets of a minimum wage beyond employment eects.
In an analysis of Census data, Joseph Sabia and Robert
Nielson found no statistically signicant evidence that
minimum wage increases helped reduce nancial, housing, health, or food insecurity.[63] This study was undertaken by the Employment Policies Institute, a think tank
funded by the food, beverage and hospitality industries.
In 2012, Michael Reich published an economic analysis
that suggested that a proposed minimum wage hike in San
Diego might stimulate the citys economy by about $190
million.[64]
4.2 Research subsequent to Card and
The Economist wrote in December 2013: A minimum
Kruegers work
wage, providing it is not set too high, could thus boost pay
with no ill eects on jobs....Americas federal minimum In subsequent research, David Neumark and William
wage, at 38% of median income, is one of the rich worlds Wascher attempted to verify Card and Kruegers results
lowest. Some studies nd no harm to employment from by using administrative payroll records from a sample of
4.3
Statistical meta-analyses
7
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 eects 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.[76][77]
large fast food restaurant chains in order to verify employment. They found that the minimum wage increases
were followed by decreases in employment. On the other
hand, an assessment of data collected and analyzed by
Neumark and Wascher did not initially contradict the
Card and Krueger results,[70] but in a later edited version they found a four percent decrease in employment,
and reported that the estimated disemployment eects
in the payroll data are often statistically signicant at the
5- or 10- percent level although there are some estimators and subsamples that yield insignicantalthough almost always negative employment eects.[71][72] However, this papers conclusions were rebutted in a 2000 paper by Card and Krueger.[73] A 2011 paper has reconciled the dierence between Card and Kruegers survey
data and Neumark and Waschers payroll-based data. The
paper shows that both datasets evidence conditional employment eects that are positive for small restaurants,
but are negative for large fast-food restaurants.[74]
A 2013 study by Meer and West concluded that the minimum wage reduces net job growth, primarily through
its eect on job creation by expanding establishments
... most pronounced for younger workers and in industries with a higher proportion of low-wage workers.[81]
This study by Meer and West was later critiqued for its
trends of assumption in the context of narrowly dened
low-wage groups.[82] 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.[83][84]
Another 2013 study by Suzana Laporek of the University of Primorska, on youth unemployment in Europe claimed there was a negative, statistically signicant impact of minimum wage on youth employment.[85]
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 eects on employment in the Eastern and
for
In 1996 and 1997, the federal minimum wage was in- Central regions of China, and result in disemployment
[86]
females,
young
adults,
and
low-skilled
workers.
creased 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 eects
4.3 Statistical meta-analyses
of minimum wage increases in the same area, subsequent
to the 1992 change studied by Card and Krueger. A study Several researchers have conducted statistical metaby Homan and Trace found the result anticipated by tra- analyses of the employment eects of the minimum
ditional theory: a detrimental eect on employment.[75]
wage. In 1995, Card and Krueger analyzed 14 earlier
Further application of the methodology used by Card
and Krueger by other researchers yielded results similar
to their original ndings, across additional data sets.[76]
A 2010 study by three economists (Arindrajit Dube of
the University of Massachusetts Amherst, T. William
Lester of the University of North Carolina at Chapel
Hill, and Michael Reich of the University of California, Berkeley), compared adjacent counties in dierent
states where the minimum wage had been raised in one
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 nd employers willing to hire them
at that wage.[91]
Consistent with the results from Doucouliagos and Stanley, and Card and Krueger, Baskaya and Rubinsteins
2011 study, which analyzed 24 papers on the minimum
wage, found mild positive, yet statistically insignicant
association between the change in the employment of
teenagers at state minimum wage levels. However, when
minimum wage is set at the federal level, they found no- In 2006, the International Labour Organization (ILO)
table wage impacts and large corresponding disemploy- argued that the minimum wage could not be directly
linked to unemployment in countries that have suered
ment eects.[78]
job losses.[15] In April 2010, the Organisation for Economic Co-operation and Development (OECD) released
a report arguing that countries could alleviate teen un5 Debate over consequences
employment by lowering the cost of employing lowskilled youth through a sub-minimum training wage.[119]
Minimum wage laws aect workers in most low-paid A study of U.S. states showed that businesses annual and
elds of employment[10] and have usually been judged average payrolls grow faster and employment grew at a
against the criterion of reducing poverty.[91] Minimum faster rate in states with a minimum wage.[120] The study
wage laws receive less support from economists than from showed a correlation, but did not claim to prove causathe general public. Despite decades of experience and tion.
economic research, debates about the costs and benets
Although strongly opposed by both the business commuof minimum wages continue today.[10]
nity and the Conservative Party when introduced in 1999,
Various groups have great ideological, political, nancial, the Conservatives reversed their opposition in 2000.[121]
and emotional investments in issues surrounding miniAccounts dier as to the eects of the minimum wage.
mum wage laws. For example, agencies that administer The Centre for Economic Performance found no disthe laws have a vested interest in showing that their laws
cernible impact on employment levels from the wage
do not create unemployment, as do labor unions whose increases,[122] while the Low Pay Commission found that
members nances are protected by minimum wage laws.
employers had reduced their rate of hiring and employee
On the other side of the issue, low-wage employers such hours employed, and found ways to cause current workers
as restaurants nance the Employment Policies Institute, to be more productive (especially service companies).[123]
which has released numerous studies opposing the mini- The Institute for the Study of Labor found prices in the
mum wage.[92][93] The presence of these powerful groups minimum wage sector rose signicantly faster than prices
and factors means that the debate on the issue is not in non-minimum wage sectors, in the four years followalways based on dispassionate analysis. Additionally, ing the implementation of the minimum wage.[124] Neiit is extraordinarily dicult to separate the eects of ther trade unions nor employer organizations contest the
minimum wage from all the other variables that aect minimum wage, although the latter had especially done
employment.[23]
so heavily until 1999.
The following table summarizes the arguments made by In 2014, supporters of minimum wage cited a study that
those for and against minimum wage laws:
found that job creation within the United States is faster
A widely circulated argument that the minimum wage was in states that raised their minimum wages.[95][125][126] In
ineective at reducing poverty was provided by George 2014, supporters of minimum wage cited news organizaStigler in 1949:
tions who reported the state with the highest minimum-
9
wage garnered more job creation than the rest of the lished by the Economic Policy Institute. 95 of the 605
United States.[95][96][127][128][129][130][131]
signatories responded. They found that a majority signed
In 2014, in Seattle, Washington, liberal and progressive on the grounds that it transferred income from employers
business owners who had supported the citys new $15 to workers, or equalized bargaining power between them
minimum wage held o on expanding their businesses in the labor market. In addition, a majority considered
potential drawback to
and thus creating new jobs, due to the uncertain timescale disemployment to be a moderate
[141]
the
increase
they
supported.
[132]
of the wage increase implementation.
Surveys of economists
In 2013, a diverse group of economics experts was surveyed on their view of the minimum wages 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 nd employment. 32% disagreed and the remaining respondents were uncertain or had no opinion on the
question. 49% agreed with the statement, The distortionary costs of raising the federal minimum wage to $9
per hour and indexing it to ination are suciently small
compared with the benets to low-skilled workers who
can nd employment that this would be a desirable policy, while 11% disagree.[142]
10
7.2
10 NOTES
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.[144]
8 US movement
In January 2014, Joseph Stiglitz, Peter Diamond, Robert
Solow, Eric Maskin and 75 American economists wrote
a letter to the US Congress and the US President to demand that, by 2016, the US government should raise the
minimum wage to $10.10. They endorsed the Minimum
Wage Fairness Act which was introduced by US Senator
Tom Harkin in 2013.[153][154]
9 See also
7.3
7.4
Collective bargaining
10 Notes
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11
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economic justice. Minimum-wage legislation, by its very
[95] http://www.cepr.net/index.php/blogs/cepr-blog/
nature, benets some at the expense of the least experi2014-job-creation-in-states-that-raised-the-minimum-wage
enced, least productive, and poorest workers. (Cato)
14
10 NOTES
[113] Williams, Walter (1989). South Africas War Against Cap- [132] Minimum Wage Limbo Keeps Small Business Owners Up
italism. New York: Praeger. ISBN 0-275-93179-X.
At Night, kuow.org, May 22, 2014
[114] A blunt instrument, The Economist, October 26, 2006 [133] Kearl, J. R.; Pope, Clayne L.; Whiting, Gordon C.;
(English)
Wimmer, Larry T. (May 1979). A Confusion of
Economists?". The American Economic Review 69 (2):
[115] Partridge, M. D.; Partridge, J. S. (1999). Do mini2837. JSTOR 1801612.
mum wage hikes reduce employment? State-level evidence from the low-wage retail sector. Journal of Labor
[134] Alston, Richard M.; Kearl, J. R.; Vaughan, Michael B.
Research 20 (3): 393. doi:10.1007/s12122-999-1007-9.
(May 1992). Is There a Consensus Among Economists
in 1990s?". The American Economic Review 82 (2): 203
[116] The Eects of a Minimum-Wage Increase on Employ9. JSTOR 2117401.
ment and Family Income. February 18, 2014. Retrieved
July 26, 2014.
[117] http://thinkprogress.org/economy/2014/02/21/3317901/
walmart-minimum-wage-prices/
[118] http://www.fool.com/investing/general/2014/06/08/
[136]
what-will-a-higher-minimum-wage-cost-you-at-mcdona.
aspx
[137]
[119] Scarpetta, Stephano, Anne Sonnet and Thomas Manfredi,Rising Youth Unemployment During The Crisis: How
To Prevent Negative Long-Term Consequences on a Generation?, April 14, 2010 (read-only PDF)
[120] Fiscal Policy Institute, States with Minimum Wages
Above the Federal Level have had Faster Small Business
and Retail Job Growth, March 30, 2006.
Hall, Robert Ernest. Economics: Principles and Applications. Centage Learning. ISBN 1111798206.
Fuller, Dan; Geide-Stevenson, Doris (2003). Consensus Among Economists:
Revisited.
Journal of Economic Education 34 (4):
36987.
doi:10.1080/00220480309595230.
15
[150] http://www.adamsmith.org/news/press-releases/
Issues about Minimum Wage from the AFL-CIO
comment-minimum-wage-rise-risks-harming-workers-cut-taxes-on-the-poor-instead
(U.S. labor federation favoring the minimum wage)
[151] Olson, Parmy (9/01/2009). The Best Minimum Wages In
Europe. Forbes. Retrieved 21 February 2014.
[152] Labor Criticizes. Lewiston Morning Tribune. Associated Press. March 2, 1933. pp. 1, 6.
11
Further reading
Burkhauser, R. V. (2014). Why minimum wage increases are a poor way to help the working poor (No.
86). IZA Policy Paper, Institute for the Study of Labor (IZA).
12
External links
Opposed
Reporting the Minimum Wage from The Cato Institute (U.S. libertarian organization opposed to the
minimum wage)
The Economic Eects of Minimum Wages from
Show-Me Institute (U.S. libertarian organization
opposed to the minimum wage)
Economics in One Lesson: The Lesson Applied,
Chapter 19: Minimum Wage Laws by Henry Hazlitt
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Jusinlloyd101, Thetrollface4, Thetrollface5, Thetrollface1, Resck6, Greennbooks, Etherington1993, Benwoar, Zugly19, FourViolas, Callum0790, Suene34, Jamieandersen106, Dfqw3287, Kiemar013, KasparBot, Beaugrand RTMC, Dallasm15 and Anonymous: 1035
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