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Wage discrimination and partial compliance with the minimum wage law

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  • Yang-Ming Chang

    ()
    (Kansas State University)

  • Bhavneet Walia

    ()
    (Kansas State University)

Abstract

This paper presents a simple model to characterize the discriminatory behavior of a non-complying firm in a minimum-wage economy. In the analysis, the violating firm pays one “favored” group of workers the statutory minimum and the other “non-favored” group of workers a sub-minimum. We find conditions under which law enforcement is ineffective in improving the between-group wage differentials. We show that an increase in the minimum wage raises the sub-minimum wage and employment of workers in the non-favored group, but reduces the employment of workers in the favored group. The effect of the minimum wage increase on total employment is unambiguously negative, however.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 10 (2007)
Issue (Month): 4 ()
Pages: 1-7

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Handle: RePEc:ebl:ecbull:eb-07j40001

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  1. George J. Stigler, 1974. "The Optimum Enforcement of Laws," NBER Chapters, National Bureau of Economic Research, Inc, in: Essays in the Economics of Crime and Punishment, pages 55-67 National Bureau of Economic Research, Inc.
  2. Orley Ashenfelter & Robert Smith, 1977. "Compliance with the Minimum Wage Law," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 478, Princeton University, Department of Economics, Industrial Relations Section..
  3. repec:ebl:ecbull:v:10:y:2005:i:4:p:1-10 is not listed on IDEAS
  4. A. Mitchell Polinsky & Steven Shavell, 1999. "The Economic Theory of Public Enforcement of Law," NBER Working Papers 6993, National Bureau of Economic Research, Inc.
  5. LaVonne A. Booton & Julia I. Lane, 1985. "Hospital Market Structure and the Return to Nursing Education," Journal of Human Resources, University of Wisconsin Press, vol. 20(2), pages 184-196.
  6. Alan Manning & Ted To, 2002. "Oligopsony and Monopsonistic Competition in Labor Markets," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 16(2), pages 155-174, Spring.
  7. repec:ebl:ecbull:v:10:y:2004:i:9:p:1-7 is not listed on IDEAS
  8. Yossi Tobol, 2005. "Wage discrimination as an illegal behavior," Economics Bulletin, AccessEcon, vol. 10(4), pages 1-10.
  9. Yang-Ming Chang, 1992. "Noncompliance Behavior of Risk-Averse Firms Under the Minimum Wage Law," Public Finance Review, , , vol. 20(3), pages 390-401, July.
  10. Grenier, Gilles, 1982. "On Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 90(1), pages 184-87, February.
  11. Yaniv, Gideon, 2001. "Minimum Wage Noncompliance and the Employment Decision," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 19(3), pages 596-603, July.
  12. Yaniv, Gideon, 1994. "Complaining about noncompliance with the minimum wage law," International Review of Law and Economics, Elsevier, Elsevier, vol. 14(3), pages 351-362, September.
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Cited by:
  1. Chang, Yang-Ming & Huang, Biing-Wen & Chen, Yun-Ju, 2012. "Labor supply, income, and welfare of the farm household," Labour Economics, Elsevier, Elsevier, vol. 19(3), pages 427-437.

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