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Wage discrimination and partial compliance with the minimum wage law

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Author Info
Yang-Ming Chang () (Kansas State University)
Bhavneet Walia () (Kansas State University)

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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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File URL: http://economicsbulletin.vanderbilt.edu/2007/volume10/EB-07J40001A.pdf
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Publisher Info
Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 10 (2007)
Issue (Month): 4 ()
Pages: 1-7
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ebl:ecbull:v:10:y:2007:i:4:p:1-7

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Related research
Keywords: Wage discrimination; Minimum wage law; Enforcement;

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Find related papers by JEL classification:
J4 - Labor and Demographic Economics - - Particular Labor Markets
J7 - Labor and Demographic Economics - - Labor Discrimination

References listed on IDEAS
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  1. Chang, Yang-Ming & Ehrlich, Isaac, 1985. "On the Economics of Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 84-91, February. [Downloadable!] (restricted)
  2. A. Mitchell Polinsky & Steven Shavell, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March. [Downloadable!] (restricted)
    Other versions:
  3. Yaniv, Gideon, 1994. "Complaining about noncompliance with the minimum wage law," International Review of Law and Economics, Elsevier, vol. 14(3), pages 351-362, September. [Downloadable!] (restricted)
  4. Grenier, Gilles, 1982. "On Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 184-87, February. [Downloadable!] (restricted)
  5. Yossi Tobol, 2005. "Wage discrimination as an illegal behavior," Economics Bulletin, Economics Bulletin, vol. 10(4), pages 1-10. [Downloadable!]
  6. Yaniv, Gideon, 2001. "Minimum Wage Noncompliance and the Employment Decision," Journal of Labor Economics, University of Chicago Press, vol. 19(3), pages 596-603, July. [Downloadable!] (restricted)
  7. V. Bhaskar & Alan Manning & Ted To, 2002. "Oligopsony and Monopsonistic Competition in Labor Markets," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 155-174, Spring. [Downloadable!] (restricted)
  8. Gideon Yaniv, 2004. "Minimum wage noncompliance and the sub-minimum wage rate," Economics Bulletin, Economics Bulletin, vol. 10(9), pages 1-7. [Downloadable!]
  9. Stigler, George J, 1970. "The Optimum Enforcement of Laws," Journal of Political Economy, University of Chicago Press, vol. 78(3), pages 526-36, May-June. [Downloadable!] (restricted)
    Other versions:
  10. Ashenfelter, Orley & Smith, Robert S, 1979. "Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 333-50, April. [Downloadable!] (restricted)
    Other versions:
  11. William M. Boal & Michael R. Ransom, 1997. "Monopsony in the Labor Market," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 86-112, March. [Downloadable!] (restricted)
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