The Minimum-Wage Controversy

Case Against Minimum Wage

above equilibrium minimum wage will push employers back up labor D curves, causing them to hire fewer workers
higher labor costs might force some firms to shut down
- resulting in unemployment for poor, low wage workers that minimum wage was supposed to help
"poorly targeted" to reduce household poverty
- Much of the benefit of the minimum wage accrues to workers, including teenagers, who do not live in poverty households

Case for Minimum Wage

in a more real, low-pay labor market where there is some monopsy power, minimum wage can increase wage rates w/o resulting in unemployment
may increase labor productivity
- shifts labor demand curve to the right and offset any reduced employment that minimum wage might cause
may reduce labor turnover (i.e. rate at which workers voluntary quit)
fewer low-productive workers, average productivity of firm's workers would increase
a higher minimum wage may eliminate the motive that monopsonistic firms have for restricting employment

Evidence and Conclusions

The overall effect of the minimum wage is uncertain:
- Employment and unemployment effects of the mnimum wage do not appear to be as great as critics believe
- Yet, the minimum wage is not as strong an antipoverty tool as many supporters believe
  - a large part of its effect is dissipated on nonpoverty families
A political tool?
- More workers are helped by the mnimum wage than hurt
- Assures society that employers are not exploiting "vulnerable, low skilled workers."

Christinah	Latest page update: made by Christinah , Dec 30 2007, 4:40 AM EST (about this update About This Update Edited by Christinah 27 words added 8 words deleted view changes - complete history)
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