Minimum Wage

How Economists Still Disagree About a Minimum Wage

minimum wage impact
Comments (1)
  1. Rick Shapiro says:

    Before rushing to assert that minimum wage laws must reduce employment, it should be noted that labor market frictions (such as desperation and difficulty of commuting) weigh more heavily on workers than on employers. The resulting partial oligopsomy in the labor market, in many places, violates the conditions of the arrow debreu general equilibrium proof, so that minimum wage laws can not only not cause dead-weight losses, but also can actually increase product.
    Even where minimum wage laws do depress employment, uniform national laws will minimize internal capital migration; and international differences will result (via currency depreciation) in full employment via comparitive advantage.
    Whilst increased cost of intermediate goods for exports will unfortunately be a positive feedback, the net effect will be higher prices primarily for consumers of imports. Do we want to be a place where the iron law of wages drives vulnerable workers to poverty, in order to have cheaper TVs?

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