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Why minimum wage hikes may not reduce employment

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  • Madeline Zavodny

Abstract

Recent research has challenged the conventional wisdom among economists that increases in the minimum wage reduce employment among low-wage workers. Although some studies continue to find negative effects, others suggest that moderately raising the minimum wage may not reduce employment. The author of this article describes and evaluates several models that may explain the controversial recent findings and proposes avenues for future research that would help determine the validity of these models. ; The author notes that if the recent findings that minimum wage increases do not always adversely affect employment are correct, economists may need to reconsider their views of how labor markets work. In addition, research on other effects of minimum wage increases is needed. For example, the distributional consequences are important, particularly if higher-skilled workers displace lower-skilled workers when the minimum wage is raised. The recent findings challenging traditional thinking about employment and the minimum wage should be taken as the starting point for a larger examination of the effects of the minimum wage rather than an end to the debate.

Suggested Citation

  • Madeline Zavodny, 1998. "Why minimum wage hikes may not reduce employment," Economic Review, Federal Reserve Bank of Atlanta, vol. 83(Q 2), pages 18-28.
  • Handle: RePEc:fip:fedaer:y:1998:i:q2:p:18-28:n:v.83no.2
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    Cited by:

    1. Pia M. Orrenius & Madeline Zavodny, 2007. "The minimum wage and Latino workers," Working Papers 0708, Federal Reserve Bank of Dallas.
    2. Christian Ragacs, 2003. "Mindestlöhne und Beschäftigung: Die empirische Evidenz," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 29(2), pages 215-246.
    3. John Connor, 2007. "Woe for the Working Classes," Challenge, Taylor & Francis Journals, vol. 50(2), pages 20-38.
    4. Christian Ragacs, 2003. "Mindestlöhne und Beschäftigung: Ein Überblick über die neuere empirische Literatur," Working Papers geewp25, Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
    5. KARGI, Bilal, 2013. "Ücret Yapışkanlığı Hipotezi'nin Test Edilmesi: Türkiye'de Asgari Ücret ve Büyüme Üzerine Zaman Serileri Analizi (2005-2012) [Testing Wage Rigidity Stickiness Hypothesis: Time Series Analysis on the," MPRA Paper 55695, University Library of Munich, Germany.
    6. Josip Lesica, 2018. "Lobbying For Minimum Wages," Economic Inquiry, Western Economic Association International, vol. 56(4), pages 2027-2057, October.

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    Keywords

    Employment (Economic theory); Minimum wage;

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