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The Ambiguous Effect of Minimum Wages on Workers and Total Hours

Author

Listed:
  • Eric Strobl

    (Ecole Polytechnique Paris)

  • Frank Walsh

    (University College Dublin)

Abstract

We model a standard 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 also demonstrate that total hours worked at the firm may rise if there are small fixed costs to hiring workers.

Suggested Citation

  • 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.
    • Handle: RePEc:ucn:wpaper:200714
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    File URL: http://www.ucd.ie/economics/research/papers/2007/WP07.14.pdf
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    References listed on IDEAS

    as
    1. Brown, Charles, 1999. "Minimum wages, employment, and the distribution of income," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 32, pages 2101-2163, Elsevier.
    2. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695, Elsevier.
    3. Gregg Lewis, 1969. "Interés del Empleador en las Horas de Trabajo del Empleado," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 6(18), pages 38-54.
    4. Mark B. Stewart & Joanna K. Swaffield, 2008. "The Other Margin: Do Minimum Wages Cause Working Hours Adjustments for Low‐Wage Workers?," Economica, London School of Economics and Political Science, vol. 75(297), pages 148-167, February.
    5. Sara Connolly & Mary Gregory, 2002. "The National Minimum Wage and Hours of Work: Implications for Low Paid Women," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(supplemen), pages 607-631, December.
    6. Richard Dickens & Alan Manning, 2004. "Spikes and spill-overs: The impact of the national minimum wage on the wage distribution in a low-wage sector," Economic Journal, Royal Economic Society, vol. 114(494), pages 95-101, March.
    7. Dickens, Richard & Alan Manning, 2003. "The Impact of the National Minimum Wage on the Wage Distribution in a Low-Wage Sector," Royal Economic Society Annual Conference 2003 60, Royal Economic Society.
    8. M. S. Feldstein, 1967. "Specification of the Labour Input in the Aggregate Production Function," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 34(4), pages 375-386.
    9. Rebitzer, James B. & Taylor, Lowell J., 1995. "The consequences of minimum wage laws Some new theoretical ideas," Journal of Public Economics, Elsevier, vol. 56(2), pages 245-255, February.
    10. Neumark, David & Wascher, William L., 2007. "Minimum Wages and Employment," Foundations and Trends(R) in Microeconomics, now publishers, vol. 3(1–2), pages 1-182, March.
    11. repec:eee:labchp:v:1:y:1986:i:c:p:641-692 is not listed on IDEAS
    12. Bhaskar, V & To, Ted, 1999. "Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition," Economic Journal, Royal Economic Society, vol. 109(455), pages 190-203, April.
    13. Strobl, Eric & Walsh, Frank, 2007. "Dealing with monopsony power: Employment subsidies vs. minimum wages," Economics Letters, Elsevier, vol. 94(1), pages 83-89, January.
    14. Kinoshita, Tomio, 1987. "Working Hours and Hedonic Wages in the Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1262-1277, December.
    15. De Fraja, Gianni, 1999. "Minimum Wage Legislation, Productivity and Employment," Economica, London School of Economics and Political Science, vol. 66(264), pages 473-488, November.
    16. Daniel B. Klein & Stewart Dompe, 2007. "Reasons for Supporting the Minimum Wage: Asking Signatories of the "Raise the Minimum Wage" Statement," Econ Journal Watch, Econ Journal Watch, vol. 4(1), pages 125-167, January.
    17. Connolly, Sara & Gregory, Mary, 2002. "The National Minimum Wage and Hours of Work: Implications for Low Paid Women," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(0), pages 607-631, Supplemen.
    18. Neumark, D. & Schweitzer, M. & Wascher, W., 1999. "The Effect of Minimum Wages Throughout the Wage Distribution," Papers 9919, London School of Economics - Centre for Labour Economics.
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    Cited by:

    1. Michael Shannon, 2011. "The Employment Effects of Lower Minimum Wage Rates for Young Workers: Canadian Evidence," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 50(4), pages 629-655, October.

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    More about this item

    Keywords

    Minimum wages; hours; employment;
    All these keywords.

    JEL classification:

    • 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

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