Drowning the poor in excessive wages: the problems of the minimum wage law
Purpose – The purpose of this paper is to demonstrate that the minimum wage law is deleterious to the unskilled, to the young and to members of minority groups. Design/methodology/approach – The main method used in this paper is the logical application of basic supply and demand economic analysis. Findings – The authors found that when a minimum wage of any given level is imposed, those with productivities below that level are at great risk of unemployment. For example, with a minimum wage of $10 per hour, those who can only produce at the rate of $1-$7, $8, or $9 per hour are likely to become unemployed. Similarly, if the level is raised to, say, $100, then even people with productivity levels of $8 or $90 per hour will lose their jobs. Research limitations/implications – More effort should be made to ascertain who it is that gains from this law, if it is not the poor and unskilled. Attention should be focused on labor unions in this regard. Practical implications – The practical implication of this research is that the minimum wage should be repealed. Social implications – Present public attitudes, however, overwhelmingly support this legislative enactment. But this is based on economic illiteracy. The public needs to be educated in basic economics. Originality/value – This paper, if its implications are implemented, will have great value for all those who wish the unemployment rate to be radically reduced.
Volume (Year): 28 (2012)
Issue (Month): 4 (November)
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- Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-49, May.
- 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.
- David Neumark & William Wascher, 1992. "Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws," ILR Review, Cornell University, ILR School, vol. 46(1), pages 55-81, October.
- repec:sae:ilrrev:v:49:y:1996:i:3:p:547-552 is not listed on IDEAS
- Finis Welch, 1977. "What Have We Learned from Empirical Studies of Unemployment Insurance?," ILR Review, Cornell University, ILR School, vol. 30(4), pages 451-461, July.
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