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Minimum Wage Legislation, Work Conditions and Employment

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  • De Fraja, Gianni

Abstract

The effects of minimum wage legislation are analysed under the assumption that firms are able to alter the working conditions of their employees, and that workers have different preferences about the characteristics of their job. The main findings tally with Card and Krueger’s (1995) puzzling empirical evidence about the effects of changes in the minimum wage: the effects on employment are limited; there is a positive spillover on high wage workers; and there is bunching of workers at the minimum wage. The paper concludes by showing that if employers can change investment in fixed capital and in training, then an increase in the minimum wage will induce them to increase both, and this in turn may increase aggregate employment.

Suggested Citation

  • De Fraja, Gianni, 1996. "Minimum Wage Legislation, Work Conditions and Employment," CEPR Discussion Papers 1524, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1524
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    Citations

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    Cited by:

    1. Daniel Cardona & Fernando Sanchez Losada, 2003. "Union Power, Minimum Wage Legislation, Endogenous Labor Supplies and Production," Working Papers in Economics 105, Universitat de Barcelona. Espai de Recerca en Economia.
    2. Catherine SAGET, 2001. "Poverty reduction and decent work in developing countries: Do minimum wages help?," International Labour Review, International Labour Organization, vol. 140(3), pages 237-269, September.

    More about this item

    Keywords

    Capital Investment; Minimum Wage Legislation; Training;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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