Minimum wage
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[[WP:UNDO|Undid]] revision 226099605 by [[Special:Contributions/CBKH|CBKH]] ([[User talk:CBKH|talk]])
{{BusinessLaw}}
A '''minimum wage''' is the lowest hourly, daily, or monthly [[wage]] that employers may legally pay to employees or workers. First enacted in [[Australia]] and [[New Zealand]] in the late nineteenth century,<ref name="Cost of Living">American Academy of Political and Social Science. "The Cost of Living." Philadelphia, 1913.</ref> minimum wage laws are now enforced in more than 90% of all countries.<ref name="ILO 2006">[http://www.ilo.org/public/english/protection/condtrav/pdf/infosheets/w-1.pdf ILO 2006: Minimum wages policy (PDF)]</ref>
Both supporters and opponents of the minimum wage assert that the issue is a matter of ethics and [[social justice]] involving worker [[exploitation]] and earning ability.<ref name="Cost of Living"/> Supporters claim that increases in the minimum wage increase workers' earning power and protect workers against employer exploitation. Opponents claim that increases in the minimum wage increase [[unemployment]], and that (1) the reduction in earning power due to the unemployment outweighs the increase in earning power among minimum wage workers who remain employed, while (2) businesses effectively exploit the unemployed minimum wage workers by transferring their former wages to the minimum wage workers who remain employed.
==Minimum wage law==
{{main|Minimum wage law}}
Minimum wage laws [[List of minimum wages by country|vary greatly]] across many different jurisdictions, not only in setting a particular amount of money (e.g. [[United States dollar|US$]]5.85 per hour under U.S. Federal law, or [[British pound|£]]5.52 (for those aged 22+) in the United Kingdom), but also in terms of which pay period (e.g. Russia and China set monthly minimums) or the scope of coverage. For instance, not all workers may be paid a full minimum wage, because exceptions may be made for teenagers or those under 21. Some jurisdictions allow employers to count tips given to their workers as credit towards the minimum wage level.<!--
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==Economics of the minimum wage==
Economic theory analyzes the effects of minimum wages within the context of labor markets (c.f. [[labor economics]]). In a labor market, workers supply their labor, which is sold for wages, and employers demand labor.
The neoclassical economic argument views the labor market as perfectly competitive. In perfectly competitive markets, the market price settles to the marginal value of the product. Therefore, under the perfect competition assumption, in the absence of a minimum wage, workers are paid their marginal value. As is the case with all (binding) [[price floor]]s above the [[Economic equilibrium|equilibrium]], minimum wage laws are predicted to result in more people being willing to offer their labor for hire, but fewer employers wishing to hire labor. The result is a [[surplus]] of labor, i.e. [[unemployment]].
====Supply of labor curve====
The amount of labor that workers supply is generally considered to be positively related to the nominal wage. Economists graph this relationship with the wage on the vertical axis and the quantity of labor supplied on the horizontal axis. The supply of labor curve then is upward sloping, and is shown as a line moving up and to the right.
The upward sloping labor supply curve results from the fact that, as wages rise, people in the labor force are incented to spend less time in leisure and more time working while people outside the labor force are incented to join the labor force. As wages rise, the cost of spending time in leisure and the cost of not being a labor force participant rises.
====Demand for labor curve====
The amount of labor demanded by firms is generally assumed to be negatively related to the nominal wage; as wages increase, firms demand less labor. As with the supply of labor curve, this relationship is often depicted on a graph with wages represented on the vertical axis, and the quantity of labor demanded on the horizontal axis. The demand for labor curve is downward sloping, and is depicted as a line moving down and to the right on a graph.
A firm's cost is a function of the wage rate. As the wage rate rises, it becomes more expensive for firms to hire workers and so firms hire fewer workers.
However, if employers have market power, then just as monopoly sellers face only a demand curve and have no canonical supply curve, monopsonistic buyers of labor face only a supply curve yet do not generate a demand curve for laborers to face.
====Supply and demand for labour====
[[Image:Wage labour.svg|Graph of Labor Market|right|380px]]
Combining the demand and supply curves for labor allows us to examine the effect of a 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 may be an incorrect assumption since jobs this low on the demand curve may be so integral to a business' function that they will not simply disappear because the business has to pay more to hire people for those positions.
The point at which the demand for labor curve and the supply of labor curve intersect is the labor market equilibrium. At the equilibrium, the number of people seeking jobs (the quantity supplied of labor) equals the number of jobs available (the quantity demanded of labor). If the wage rate rises above the equilibrium wage as shown in this chart, then the number of people seeking jobs would seem to exceed the number of jobs available. If the number of jobs is thus negatively affected, there would be fewer jobs available, and would theoretically lead to unemployment. Hence, in the absence of government intervention, competition among workers for the limited number of jobs would cause wages to fall until the wage rate reached the equilibrium. A minimum wage prevents wages from falling.
===Standard theory criticism===
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."<ref>{{cite paper |author= Gary Fields |title= The Unemployment Effects of Minimum Wages |version= |publisher= International Journal of Manpower |date= 1994 |url= |format= |accessdate = 2007-02-12 }}</ref>
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, information costs, imperfect mobility and the 'personal' element of labor markets. In such a case the diagram above 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 downward labor demand curve shown in the diagram above, monopsonistic employers would use a steeper downward 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 productivity]] of labor.<ref name="Manning2003">{{cite book |title=Monopsony in motion: Imperfect Competition in Labor Markets |last=Manning |first=Alan |authorlink= |coauthors= |year=2003 |publisher=Princeton University Press |location=Princeton, NJ |isbn=0691113122 |pages= }}</ref> This view emphasizes the role of minimum wages as a [[regulated market|market regulation]] policy akin to [[antitrust]] policies, as opposed to an illusory "[[free lunch]]" for low-wage workers. [[Laissez-faire]] economists such as [[Thomas Sowell]] point out that no [[collusion]] between employers to keep wages low has ever been demonstrated, asserting that in most labor markets, [[Supply and demand|demand meets supply]], and it is only minimum wage laws and other market interference which cause the imbalance.
===Debate===
{{MultiCol}}
;Support
Supporters of the minimum wage claim it has these effects:
* Helps small businesses as well as big businesses.<ref name="EPI Study on the effects of minimum wage on Small Business">[http://www.epi.org/content.cfm/webfeatures_viewpoints_raising_minimum_wage_2004 Minimum Wage and Its Effects on Small Business<!-- Bot generated title -->]</ref>
* Increases the standard of living for the poorest and most vulnerable class in society and raises average.<ref name="EPI site">http://www.epi.org/content.cfm/issueguides_minwage Real Value of the Minimum Wage</ref>
* Motivates and encourages employee to work harder. (Contrast with welfare transfer payments.)<ref name="freeman paper">{{cite paper |author= Richard B. Freeman |title= Minimum Wages – Again! |version= |publisher= International Journal of Manpower |date= 1994 |url= |format= |accessdate = 2007-02-12 }}</ref>
* Does not have budget consequence on government. "Neither taxes nor public sector borrowing requirements rise." (Contrast with negative income taxes such as the [[Earned income tax credit|EITC]].)<ref name="freeman paper" />
* Minimum wage is administratively simple; workers only need to report violations of wages less than minimum, minimizing a need for a large enforcement agency.<ref name="freeman paper" />
* Stimulates consumption, by putting more money in the hands of low-income people who spend their entire paychecks.<ref name="EPI site" />
* Increases the [[work ethic]] of those who earn very little, as employers demand more return from the higher cost of hiring these employees.<ref name="EPI site" />
* Decreases the cost of government social welfare programs by increasing incomes for the lowest-paid.<ref name="EPI site" />
* Does not have a substantial effect on unemployment compared to most other economic factors <ref name="OECD 2006">OECD (2006): ''OECD Employment Outlook 2006'' [http://www.oecdbookshop.org/oecd/get-it.asp?REF=8106071E.PDF&TYPE=browse (read-only PDF)]</ref>, and so does not put any extra pressure on welfare systems.
* Businesses' annual and average payrolls grow faster.<ref name="EPI Study on the effects of minimum wage on Small Business">[http://www.epi.org/content.cfm/webfeatures_viewpoints_raising_minimum_wage_2004 Minimum Wage and Its Effects on Small Business<!-- Bot generated title -->]</ref>
* Employment grows more quickly when minimum wage is increased.<ref name="EPI Study on the effects of minimum wage on Small Business">[http://www.epi.org/content.cfm/webfeatures_viewpoints_raising_minimum_wage_2004 Minimum Wage and Its Effects on Small Business<!-- Bot generated title -->]</ref>
{{ColBreak}}
;Opposition
Opponents of the minimum wage claim it has these effects:
* Hurts small business more than large business. <ref>[http://www.mises.org/story/1950 Wal-Mart Warms to the State - Mises Institute<!-- Bot generated title -->]</ref><ref>[http://www.ruwart.com/Healing/chap4.html Eliminating Small Business<!-- Bot generated title -->]</ref>
* Lowers competitiveness<ref>[http://www.heritage.org/Research/Labor/wm899.cfm Wal-Mart's Perverse Strategy on the Minimum Wage<!-- Bot generated title -->]</ref>
* Reduces quantity demanded of workers. This may manifest itself through a reduction in the number of hours worked by individuals, or through a reduction in the number of jobs.<ref>Tupy, Marian L. [http://www.nationalreview.com/comment/tupy200405140912.asp ''Minimum Interference''], National Review Online, [[May 14]] [[2004]]</ref><ref name = "The Wages of Politics">{{cite news |url=http://www.opinionjournal.com/weekend/hottopic/?id=110009232 |title = The Wages of Politics |work = [[Wall Street Journal]]}} </ref>
* Reduces [[profit margin]]s of business owners employing minimum wage workers, thus encouraging a move to businesses that do not employ low-skill workers.{{Fact|date=November 2007}}<ref>[http://www.nwu-oppose-offshoring.org/offshoring-campaign/high-tech-offshoring.html Offshoring High-Tech and Professional Jobs<!-- Bot generated title -->]</ref>
* Businesses try to compensate for the decrease in profit by simply raising the prices of the goods being sold thus causing [[inflation]] and increasing the costs of goods and services produced. <ref>[http://www.heritage.org/Research/Labor/BG1162.cfm Increasing the Mandated Minimum Wage: Who Pays the Price?<!-- Bot generated title -->]</ref><ref>[http://www.mises.org/story/2377 Why Wal-Mart Matters - Mises Institute<!-- Bot generated title -->]</ref>
* Increases prices for customers of employers of minimum wage workers, which would pass through to the general price level,<ref>Aaronson, D. and E. French, 2006. [http://www.epionline.org/study_detail.cfm?sid=100 Output Prices and the Minimum Wage]. Employment Policies Institute.</ref> which disproportionately affects the prices that poor people pay for goods and services.<ref name="economist2006">[http://www.economist.com/world/na/displaystory.cfm?story_id=8090466 A blunt instrument], ''[[The Economist]]'', [[October 26]] [[2006]] {{en icon}}</ref>
* Does not improve the situation of those in [[poverty]]. "Will have only negative effects on the distribution of [[economic justice]]. Minimum-wage legislation, by its very nature, benefits some at the expense of the least experienced, least productive, and poorest workers."<ref>[http://www.cato.org/pubs/pas/pa106.html (Cato)]</ref>
* Is a limit on the freedom of both employers and employees, and can result in the exclusion of certain groups from the labor force. For example, during the [[History of South Africa in the apartheid era|apartheid era in South Africa]], white trade unions lobbied for the introduction of minimum wage laws so as to exclude black workers from the labor market. By preventing black workers from selling their labor for less than white workers, the black workers were prevented from competing for jobs held by whites.<ref>{{cite book |title=South Africa's War Against Capitalism |last=Williams |first=Walter |authorlink= |coauthors= |year=1989 |publisher=Praeger |location=New York |isbn=027593179X |pages= }}</ref>
* Businesses spend less on training their employees.<ref name="economist2006"/>
* Is less effective than the [[Earned Income Tax Credit]] at targeting the truly needy, and is more damaging to businesses.<ref name="economist2006"/>
* Reduces [[economic growth]] by skewing factor-choice incentives away from the [[optimum choice]].<ref>{{cite journal |last=Keiner |first=Morris |authorlink= |coauthors=Kudrle, Robert |year=2000 |month= |title=Does Regulation Affect Economic Outcomes? The Case of Dentistry |journal=Journal of Law and Economics |volume=43 |issue= |pages=548–582 |doi=10.2139/ssrn.202391 |url= |accessdate= |quote= }}</ref>
* Increase in [[unemployment]].<ref>{{cite news |first=Lilla |last=Wilson |authorlink= |coauthors= |title=How About a Real Minimum Wage Increase? |url=http://query.nytimes.com/gst/fullpage.html?res=950DE2D6173DF934A25752C1A96F948260 |work=[[New York Times]] |publisher= |date=1989-11-17 |accessdate=2008-02-24 }}</ref>
* Decreases [[human capital]] by encouraging people to enter the job market instead of pursuing further education.<ref name="economist2006"/>
* Hurts the least employable by making them unemployable, in effect pricing them out of the market.<ref> [http://www.cato.org/pubs/pas/pa106.html (Cato)]</ref>
* Causes outsourcing and loss of domestic manfucturing jobs to other countries.<ref>[http://www.balancedpolitics.org/minimum_wage.htm][http://www.wnd.com/news/article.asp?ARTICLE_ID=32895][http://www.bestsyndication.com/?q=122006_minimum_wage.htm]</ref>
{{EndMultiCol}}
===Debate over consequences===
====Equivalence to a tax and subsidy====
As argued by former [[Council of Economic Advisors]] Chairman [[Gregory Mankiw]], a minimum wage is equivalent to:
# A wage subsidy for unskilled workers, paid for by
# A tax on employers who hire unskilled workers.<ref>[http://gregmankiw.blogspot.com/2006/12/working-at-cross-purposes.html Greg Mankiw's Blog: Working at Cross Purposes<!-- Bot generated title -->]</ref>
The first part of the policy provides some benefit to low wage workers while the second part creates more unemployment among low wage workers. This is why the minimum wage is often criticized as a self-contradictory policy. Others argue the small decrease in employment is offset by the increased benefit to workers.
====Empirical studies====
[[Image:Min wage low education.gif|475px|right|thumb|Comparison of the minimum wage to unemployment among low skill workers in the U.S. The points in red are for the years 1998 through 2000. Unemployment for all workers in those three years was the lowest since 1970. Opponents of the minimum claim that these rises in unemployment are related to minimum wage increase.<ref name="Statistical Abstract of the United States">Statistical Abstract of the United States, Bureau of Labor Statistics [http://www.census.gov/prod/www/abs/statab.html]</ref><ref name="U.S. Department of Labor">U.S. Department of Labor, Employment Standards Administration [http://www.dol.gov/esa/minwage/chart.htm]</ref>]]
A [[classical economics]] analysis of supply and demand implies that by mandating a price floor above the equilibrium wage, minimum wage laws should cause unemployment. This is because a greater number of workers are willing to work at the higher wage while a smaller numbers of jobs will be available at the higher wage. Companies can be more selective in those whom they employ thus the least skilled and inexperienced will typically be excluded.
However, there are many other variables that can complicate the issue such as [[monopsony]] in the labour 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 labour markets in the sense of the traditional '[[company town]],' asymmetric information, imperfect mobility, and the 'personal' element of the labour transaction give some degree of wage-setting power to most firms.
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 demand and supply in labor markets and the degree to which markets differ from the efficiency that models of perfect competition predict.
A 2000 survey by [[Dan Fuller]] and [[Doris Geide-Stevenson]] reports that of a sample of 308 [[American Economic Association]] economists, 45.6% fully agreed with the statement, "a minimum wage increases unemployment among young and unskilled workers", 27.9% agreed with provisos, and 26.5% disagreed. The authors of this study also reweighted data from a 1990 sample to show that at that time 62.4% of academic economists agreed with the statement above, while 19.5% agreed with provisos and 17.5% disagreed.<ref name=Fuller>{{cite journal |last=Fuller |first=Dan |authorlink= |coauthors=Geide-Stevenson, Doris |year=2003 |month= |title=Consensus Among Economists: Revisited |journal=Journal of Economic Review |volume=34 |issue=4 |pages=369–387 |id= |url=http://www.indiana.edu/~econed/pdffiles/fall03/fuller.pdf |accessdate= |quote= }}</ref>
A similar survey in 2006 by Robert Whaples polled PhD members of the [[American Economic Association]]. Whaples found that 37.7% of respondants supported an increase in the minimum wage while 46.8% wanted it completely eliminated.<ref name="Whaples 2006">Robert Whaples (2006) "Do Economists Agree on Anything? Yes!," The Economists' Voice: Vol. 3 : Iss. 9, Article 1.
</ref>
In the debate about minimum wage it is rarely mentioned by ''how much'' the quantity of labor demanded may fall if the minimum wage is raised. Research papers by the Employment Policies Institute<ref name="epio">{{cite news |url=http://www.epionline.org/study_detail.cfm?sid=98 |publisher= Employment Policies Institute |title=The Effect of Minimum Wage Increases on Retail and Small Business Employment |date=May 2006}}</ref>
and by the [[National Center for Policy Analysis]]<ref name="ncpa">
{{cite news |url=http://www.ncpa.org/ba/ba292.html |publisher=NATIONAL CENTER FOR POLICY ANALYSIS |title=Minimum Wage Teen-age Job Killer |date=[[May 20]] [[1999]]}}</ref> claim that increases of 10% in the minimum wage may reduce demand hours worked at the minimum wage by around 1% or 2% depending on circumstances.
Some research suggests that the unemployment effects of small minimum wage increases are dominated by other factors. [http://www.epi.org/content.cfm/bp178] In Florida, where voters approved an increase in 2004, a follow-up comprehensive study confirms a strong economy with increased employment above previous years in Florida and better than in the U.S. as a whole. : “The Florida Minimum Wage After One Year.” http://www.risep-fiu.org/reports/Florida_Minimum_Wage_Report.pdf
According to a claim by the [[Mackinac Center for Public Policy]]<ref name = "mack">{{
cite news
|url=http://www.mackinac.org/archives/1998/sp1998-01.pdf
|publisher=Mackinac Center for Public Policy
|title=Great Myths of the Great Depression (page 10)
|date=[[April 22]] [[2006]]
}}</ref>, the passage of the first Federal mandated minimum wage in the United States in 1938 led to an estimated 500,000 blacks losing their jobs via replacement by higher skilled and more educated white laborers. [[Milton Friedman]], 1976 Nobel Prize winner in Economics, called the minimum wage one of the most "anti-negro laws" for what he saw as its adverse effect on black employment.<ref>http://video.google.com/videoplay?docid=6813529239937418232&q=label%3Afree+market Milton Friedman Exposes The "Unholy Coalition" of Minimum Wage Supporters</ref>
Today, the [[International Labour Organization]] (ILO)<ref name="ILO 2006"/> and the [[OECD]]<ref name="OECD 2006">OECD (2006): ''OECD Employment Outlook 2006'' [http://www.oecdbookshop.org/oecd/get-it.asp?REF=8106071E.PDF&TYPE=browse (read-only PDF)]</ref> do not consider that the minimum wage can be directly linked to unemployment in countries which have suffered job losses. Although strongly opposed by both the business community and the [[Conservative Party (UK)|Conservative Party]] when introduced in 1999, the minimum wage introduced in the UK is no longer controversial and the Conservatives reversed their opposition in 2000.<ref>{{cite web|url=http://www.politics.co.uk/issue-briefs/economy/employment/national-minimum-wage/national-minimum-wage-$366581.htm |title= National Minimum Wage|publisher=politics.co.uk|accessdate=2009-12-29}}</ref> A review of its effects found no discernible impact on pay levels.<ref>{{cite web|author=Metcalf, David|url=http://ideas.repec.org/p/cep/cepdps/dp0781.html|title=Why Has the British National Minimum Wage Had Little or No Impact on Employment?|date=April 2007}}</ref>
{| class="wikitable"
|-
! Analysis
! Source
! Comparison
! Prop. Effects on Wage
! Prop Effects on Employment
|-
! New Jersey vs. Pennsylvania
! New Jersey MW Increased to $5.05 April 1992
! Fast Food Joints Across States
! 0.11*
! 0.04
|-
! Texas Fast Food Joints
! FED MW increased to $4.25 April 1991
! High- and Low-Wage Restaurants
! 0.08*
! 0.2*
|-
! California Teenagers
! California MW increase to $4.25 July 1988
! Teenagers in California
! 0.1*
! 0.12
|-
! Teenagers Across States
! Fed MW increase to $4.25 1989 - 92
! Cross States
! 0.08*
! 0.00
|-
! Low Wage Workers Across States
! FED MW increase to $4.25
! Across States
! 0.07*
! 0.02
|-
|}
MW - Minimum Wage
FED - Federal
* indicates significance at 5%
====Card and Krueger====
The laws of demand and supply predict that an increase in the minimum wage will reduce employment.
In 1992, the Minimum wage in New Jersey increased by 18% while the adjacent state of Pennsylvania remained at $4.25. Card & Krueger gathered information on fast food restaurants that lay very close to the borders of Pennsylvania and New Jersey in an attempt to see what this effect had on employment within New Jersey. Classical economic would have concluded that relative employment should have decreased in New Jersey. Card and Krueger asked employers whether they intended to lay off workers in response to the increased minimum wage. Based on the employers' responses, the authors concluded that the increase in the minimum wage had no significant impact on employers' intentions to lay off employees.
The more common debate is on changes to minimum wages. This unified view was challenged by research done by [[David Card]] and [[Alan B. Krueger|Alan Krueger]]. In their 1997 book ''Myth and Measurement: The New Economics of the Minimum Wage'' (ISBN 0-691-04823-1), they argued the negative employment effects of minimum wage laws to be minimal if not non-existent (at least for the United States). 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. They assume that the demand for low-wage workers is [[Elasticity (economics)|inelastic]]. Noteworthy is that these results do not refute the theory underlying the prediction that a minimum wage reduces employment. Rather, the results suggest that the effect predicted by the theory may, in some instances, be small enough as to be statistically zero.
Critics, however, argue that their research was flawed.<ref name = "cato">{{cite news |url=http://www.cato.org/pubs/journal/cj15n1-8.html |publisher=Cato Institute|title=Myth and Measurement: The New Economics of the Minimum Wage |date=[[April 22]], [[2006]]}}</ref> For example, Card and Krueger gathered their data by telephoning employers in Pennsylvania and New Jersey, asking them whether they ''intended'' to increase, decrease, or make no change in their employment. Subsequent attempts to verify the claims requested payroll cards from employers to ''verify'' employment, and found that the minimum wage increases were followed by decreases in employment. On the other hand, an assessment of data collected and analyzed by David Neumark and William Wascher did not initially contradict the Card/Krueger results,<ref>http://www.epinet.org/briefingpapers/minimumw_bp_1996.pdf</ref> but in a later edited version they found that the same general sample set did increase unemployment. The 18.8% wage hike resulted in "[statistically] insignificant—although almost always negative" employment effects.<ref name="AER">Neumark & Wascher, ''American Economic Review'', Volume 90 No. 5.</ref>
Another possible explanation for why the current minimum wage laws may not affect unemployment in the United States is that the minimum wage is set close to the equilibrium point for low and unskilled workers. Thus absent the minimum wage law unskilled workers would be paid approximately the same amount. However, an increase above this equilibrium point could likely bring about increased unemployment for the low and unskilled workers.
====Reaction to Card and Krueger====
Since the introduction of a national minimum wage in the [[United Kingdom|UK]] in 1999, its effects on employment were subject to extensive research and observation by the Low Pay Commission. The Low Pay Commission found that, rather than make employees redundant, employers have reduced their rate of hiring, reduced staff hours, increased prices, and have found ways to cause current workers to be more productive (especially service companies).<ref name="LPC 2005">Low Pay Commission (2005). [http://www.lowpay.gov.uk/lowpay/report/pdf/DTi-Min_Wage.pdf ''National Minimum Wage - Low Pay Commission Report 2005'']</ref> Neither trade unions nor employer organizations contest the minimum wage, although the latter had especially done so heavily until 1999.
Some leading economists such as Greg Mankiw and Paul Krugman, do not accept the Card/Krueger results,<ref name="Krugman">Greg Mankiw. [http://gregmankiw.blogspot.com/2006/06/krugman-on-minimum-wage.html Krugman on the Minimum Wage]</ref> while many leading economists accept the Card/Krueger results,<ref>Joseph Stiglitz. [http://www2.gsb.columbia.edu/faculty/jstiglitz/download/2002_Emploi_justice_sociale.pdf Employment, social justice and societal well-being], ''International Labour Review'', 141 (1-2), p. 9 - 29.</ref><ref name="Petition">Economic Policy Institute. [http://www.epi.org/minwage/epi_minimum_wage_2006.pdf Hundreds of Leading Economists Say: Raise the Minimum Wage]</ref> The [[Joint Economic Committee]] of the [[United States Congress]] has been critical of Card and Krueger's work. They note that it conflicts with other studies done on minimum wage laws within the [[United States]] over the past 50 years.<ref>[http://www.house.gov/jec/cost-gov/regs/minimum/50years.htm 50 Years of Research on the Minimum Wage<!-- Bot generated title -->]</ref> According to the JEC, minimum wage laws have been shown to cause large amounts of [[unemployment]], especially among [[low-income]], unskilled, black, and [[teenaged]] [[demographics|populations]], as well as cause a host of other mal-effects, such as higher [[turnover (employment)|turnover]], less [[training]], and fewer fringe benefits.
According to economists Donald Deere ([[Texas A&M]]), Kevin Murphy ([[University of Chicago]]), and Finis Weltch (Texas A&M), Card and Krueger's conclusions are contradicted by "common sense and past research".
They conclude that:<ref>[http://www.cato.org/pubs/regulation/reg18n1c.html Sense and Nonsense on the Minimum Wage<!-- Bot generated title -->]</ref>
{{cquote|Each of the four studies examines a different piece of the minimum wage/employment relationship. Three of them consider a single state, and two of them look at only a handful of firms in one industry. From these isolated findings Card and Krueger paint a big picture wherein increased minimum wages do not decrease, and may increase, employment. Our view is that there is something wrong with this picture. Artificial increases in the price of unskilled laborers inevitably lead to their reduced employment; the conventional wisdom remains intact.}}
===Minimum wage alternatives===
Some critics of the minimum wage argue that a [[negative income tax]] or [[earned income tax credit]] benefits a broader population of low wage earners, and society as a whole bears the cost. In this view, this is more economically efficient because a low tax rate on the broader economy causes less [[deadweight loss]] than a high [[tax]] rate on a small section of the economy. The ability of the [[earned income tax credit]] to deliver a larger monetary benefit to poor workers at a lower cost to society was recently documented in a report by the [[Congressional Budget Office]].[http://www.cbo.gov/ftpdocs/77xx/doc7721/01-09-MinimumWageEITC.pdf]
Lewis F. Abbott argues that employing companies are economic organizations, not charities or welfare agencies, and that national minimum wage fixing is a comparatively inefficient, costly, and dysfunctional method of raising the [[living standards]] of poorer households. It is much more practical and cost-effective for governments to seek to:
* maximize opportunities for [[employment|work]] at whatever the going market rate for jobs (although virtually all full-time jobs pay more than the dole-money alternative, and even comparatively low-grade jobs offer valuable work experience and opportunities for advancement, etc.).
* top-up low wages with [[earned income tax credit]] or other direct cash subsidies if necessary; and
* save money in other areas -- e.g., cut purely social status-based [[welfare]] benefit payments to persons who do not require them, reduce monetary [[inflation]], and remove various artificial political additions to basic living costs which necessitate income subsidies in the first place (e.g. regressive [[indirect taxes]], [[tariffs]] on cheap food and clothing imports, and dear [[house|housing]] policies).
==See also==
{{col-begin}}
{{col-2}}
* [[List of minimum wages by country]]
* [[Labor market]]
* [[Labour law]]
* [[Living wage]]
* [[Maximum wage]]
*[[Guaranteed minimum income]]
* [[Positive rights]]
{{col-2}}
* [[List of U.S.A. minimum wages]]
* [[List of minimum wages in Canada]]
* ''[[Garcia v. San Antonio Metropolitan Transit Authority]]''
* ''[[Nickel and Dimed]]''
* ''[[Scratch Beginnings]]''
* [[Wage slave]]
{{col-end}}
==References==
{{reflist|2}}
==External links==
* [http://www.bls.gov/cps/minwage2005.htm Characteristics of Minimum Wage Workers: 2005] U.S. Department of Labor Bureau of Labor Statistics
* [http://www.epi.org/content.cfm/issueguides_minwage Minimum Wage Issue Guide] by the Economic Policy Institute
* [http://www.eiro.eurofound.eu.int/2005/07/study/tn0507101s.html EIROnline: ''Minimum wages in Europe'']
* [http://www.lowpay.gov.uk Low Pay Commission] in the [[United Kingdom]]
* [http://www.dti.gov.uk/employment/pay/national-minimum-wage/index.html UK Department of Trade and Industry] - The National Minimum Wage
* [http://www.dol.gov/esa/minwage/america.htm U.S. Department of Labor statistics]
* [http://www.raiseminwage.org The Minimum Wage: Information, Opinion, Research]
* [http://www.usda.gov/nass/graphics/data/fl_allwg.txt Average U.S. farm and non-farm wages compared to the minimum wage (1981 - 2004)]
* [http://www.cepr.net/publications/labor_market_2005_12.pdf Impact of Proposed Minimum-Wage Increase on Low-income Families (PDF)] Center for Economic and Policy Research (December 2005)
* [http://www.stateaction.org/issues/issue.cfm/issue/MinimumWage.xml Center for Policy Alternatives] – Minimum Wage Policy Model
* [http://www.dol.gov/dol/topic/wages/minimumwage.htm Find It! By Topic: Wages: Minimum Wage] U.S. Department of Labor
* [http://www.wagenet.gov.au/WageNet/HomePage/HomePage.asp Wagenet] - Australian Working Conditions
* [http://www.pkarchive.org/cranks/LivingWage.html Economist Paul Krugman on Minimum Wage Regulation]
* [http://www.cis.org.au/Policy/spring05/polspr05-3.htm Economist Philip Lewis - Centre for Labour Market Research - on the relationship between unemployment and minimum wages]
* [http://www.heritage.org/Research/Labor/minimumwage.cfm Minimum Wage Research, Studies and Resources] by The Heritage Foundation
* [http://brennancenter.org/subpage.asp?key=413&tier3_key=8525 Additional resources on the U.S. minimum wage and 2006 ballot initiatives] at the Brennan Center for Justice at NYU School of Law
* [http://www.nickcoons.com/blogs/comments.php?blog_id=56 Retiring Comfortably at Minimum Wage]
* [http://www.indypendent.org/?p=815 Fighting For a Minimum Wage - The Indypendent, Clark Merrefield]
* [http://www.dollarsandsense.org/archives/2006/0506wicks.html Measuring the Full Impact of Minimum and Living Wage Laws] from [[Dollars & Sense]] magazine
{{Employment}}
[[Category:Minimum wage]]
[[Category:Macroeconomics]]
[[Category:Organizational studies and human resource management]]
[[Category:Labour relations]]
[[Category:Socialism]]
[[Category:Labour law]]
[[Category:Employment law]]
[[ar:حد أدنى للأجور]]
[[bg:Минимална работна заплата]]
[[ca:Salari mínim]]
[[da:Mindsteløn]]
[[de:Mindestlohn]]
[[es:Salario mínimo]]
[[eo:Minimuma salajro]]
[[fr:Salaire minimum]]
[[ko:최저 임금]]
[[it:Salario minimo]]
[[he:שכר מינימום]]
[[lb:Mindestloun]]
[[lt:Minimalus darbo užmokestis]]
[[nl:Minimumloon]]
[[ja:最低賃金]]
[[pl:Płaca minimalna]]
[[pt:Salário mínimo]]
[[ru:Минимальный размер оплаты труда]]
[[simple:Minimum wage]]
[[sl:Minimalna plača v Sloveniji]]
[[sr:Минимални приход]]
[[fi:Minimipalkka]]
[[sv:Minimilön]]
[[tr:Asgari ücret]]
[[uk:Мінімальна заробітна плата]]
[[zh:最低工資]]