Minimum wage

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A minimum wage is the lowest hourly number, daily or monthly remuneration that employers may legally pay to workers.  Equivalently, it is the lowest wage at which workers may legally sell their labor.


  • Nearly 50 years ago, George Stigler implored economists to be “outspoken and singularly agreed” that increases in the minimum wage reduce employment. The reasoning behind this prediction is simple and compelling. According to the model presented in nearly every introductory economics textbook, an increase in the minimum wage lowers the employment of minimum-wage workers. This logic has convinced most economists: polls show that more than 90 percent of professional economists agree with the prediction that a higher minimum wage reduces employment. Such a high degree of consensus is remarkable among a profession renowned for its bitter disagreements. But there is one problem: the evidence is not singularly agreed that increases in the minimum wage reduce employment. This book presents a new body of evidence showing that recent minimum wage increases have not had the negative employment effects predicted by the textbook model. Some of the new evidence points toward a positive effect of the minimum wage on employment; most shows no effect at all. Moreover, a reanalysis of previous minimum wage studies finds little support for the prediction that minimum wages reduce employment. If accepted, our findings call into question the standard model of the labor market that has dominated economists’ thinking for the past half century.
    • David Card and Alan B. Krueger, Myth and Measurement: The New Economics of the Minimum Wage (1995), Ch. 1. Introduction and Overview
  • Women, teen-agers, Negroes and particularly Negro teen-agers, will be especially hard hit. I am convinced that the minimum-wage law is the most anti-Negro law on our statute books—in its effect not its intent. It is a tragic but undoubted legacy of the past—and one we must try to correct—that on the average Negroes have lower skills than whites. Similarly, teen-agers are less skilled than older workers. Both Negroes and teen-agers are only made worse off by discouraging employers from hiring them. On the-job training—the main route whereby the unskilled have become skilled—is thus denied them.
    • Milton Friedman,“Minimum-Wage Rates”, Newsweek, 26 September 1966, reprinted in An Economist's Protest: Columns in Political Economy (1972)
  • Even though most studies show that unemployment tends to increase as minimum wages are imposed or increased, those few studies that seem to indicate otherwise have been hailed in some quarters as having “refuted” this “myth.” However, one common problem with some research on the employment effects of minimum wage laws is that surveys of employers before and after a minimum wage increase can survey only those particular businesses which survived in both periods. Given the high rates of business failures in many industries, the results for the surviving businesses may be completely different from the results for the industry as a whole. Using such research methods, you could interview people who have played Russian roulette and “prove” from their experiences that it is a harmless activity, since those for whom it was not harmless are unlikely to be around to be interviewed. Thus you would have “refuted” the “myth” that Russian roulette is dangerous.
    • Thomas Sowell, Basic Economics, 4th ed. (2010), Ch. 10 Controlled Labor Market
  • The minimum wage provisions of the Fair Labor Standards act of 1938 have been repealed by inflation. Many voices are now taking up the cry for a higher minimum, say, of 60 to 75 cents per hour.
    Economists have not been very outspoken on this type of legislation. It is my fundamental thesis that they can and should be outspoken, and singularly agreed. The popular objective of minimum wage legislation-the elimination of extreme poverty-is not seriously debatable. The important questions are rather (1) Does such legislation diminish poverty? (2) Are there efficient alternatives? The answers are, if I am not mistaken, unusually definite for questions of economic policy. If this is so, these answers should be given.
    • George Stigler, "The Economics of Minimum Wage Legislation", The American Economic Review, Vol. 36, No. 3 (Jun., 1946)

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