The Ambiguous Effect of Minimum Wages on Workers and Total Hours
AbstractWe model a competitive labour market where firms choose combinations of workers and hours per worker to produce output. If one assumes that the scale of production has no impact on hours per worker, then the change in the number of workers and hours per worker resulting from a minimum wage are inversely related. We demonstrate that total hours worked at the firm may rise for plausible parameter values if there are small fixed costs to hiring workers. Thus, in contrast to the conventional view, we show that the effect of minimum wages on employment is ambiguous.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3643.
Length: 25 pages
Date of creation: Aug 2008
Date of revision:
Publication status: published in: Labour Economics, 2011, 18 (2), 218-228
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Other versions of this item:
- Eric Strobl & Frank Walsh, 2007. "The Ambiguous Effect of Minimum Wages on Workers and Total Hours," Working Papers 200714, School Of Economics, University College Dublin.
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-31 (All new papers)
- NEP-BEC-2008-08-31 (Business Economics)
- NEP-LAB-2008-08-31 (Labour Economics)
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