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A Survey of the Effects of the Minimum Wage on Prices

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  • Sara Lemos

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Abstract

It is well established in the literature that minimum wage increases compress the wage distribution. Firms respond to these higher labour costs by reducing employment, reducing profits, or raising prices. While there are hundreds of studies on the employment effect of the minimum wage, there are merely a handful of studies on its profit effects, and only a couple of dozen studies on its price effects. Furthermore, a comprehensive survey on minimum wage price effects is not available in the literature. Given the policy relevance of this neglected issue, in this paper we summarise and critically compare the available evidence on the effects of minimum wages on prices.

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Bibliographic Info

Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 06/9.

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Date of creation: May 2006
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Handle: RePEc:lec:leecon:06/9

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Keywords: minimum wage; employment; labour costs; cost shock; pass-through;

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Economists disagree on whether the minimum wage kills jobs. Why?
    by Brad Plumer in Ezra Klein's Wonkblog on 2013-02-14 14:00:01
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Cited by:
  1. Jonathan Wadsworth, 2009. "Did the national minimum wage affect UK prices?," LSE Research Online Documents on Economics 28677, London School of Economics and Political Science, LSE Library.
  2. Luis Eduardo Arango & Luz Karine Ardila & Miguel Igancio Gómez, 2010. "Efecto del cambio del salario mínimo en el precio de las comidas fuera del hogar en Colombia," BORRADORES DE ECONOMIA 006621, BANCO DE LA REPÚBLICA.
  3. Mirko Draca & Stephen Machin & John Van Reenen, 2006. "Minimum wages and firm profitability," LSE Research Online Documents on Economics 774, London School of Economics and Political Science, LSE Library.
  4. Mirco Tonin, 2007. "Minimum Wage and Tax Evasion: Theory and Evidence," IEHAS Discussion Papers 0701, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  5. Jonathan Wadsworth, 2010. "Did the National Minimum Wage Affect UK Prices?," Fiscal Studies, Institute for Fiscal Studies, vol. 31(1), pages 81-120, 03.
  6. John Schmitt, 2013. "Why Does the Minimum Wage Have No Discernible Effect on Employment?," CEPR Reports and Issue Briefs 2013-04, Center for Economic and Policy Research (CEPR).
  7. Margherita Comola & Luiz de Mello, 2009. "How Does Decentralised Minimum-Wage Setting Affect Unemployment and Informality?: The Case of Indonesia," OECD Economics Department Working Papers 710, OECD Publishing.

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