The Ambiguous Effect of Minimum Wages on Workers and Total Hours
We model a 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 demonstrate that total hours worked at the firm may rise for plausible parameter values if there are small fixed costs to hiring workers. Thus, in contrast to the conventional view, we show that the effect of minimum wages on employment is ambiguous.
|Date of creation:||Aug 2008|
|Date of revision:|
|Publication status:||published in: Labour Economics, 2011, 18 (2), 218-228|
|Contact details of provider:|| Postal: |
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kinoshita, Tomio, 1987. "Working Hours and Hedonic Wages in the Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1262-77, December.
- De Fraja, Gianni, 1999. "Minimum Wage Legislation, Productivity and Employment," Economica, London School of Economics and Political Science, vol. 66(264), pages 473-88, November.
- 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
- 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.
- David Neumark & Mark Schweitzer & William Wascher, 1999.
"The effects of minimum wages throughout the wage distribution,"
9919, Federal Reserve Bank of Cleveland, revised Feb 2000.
- David Neumark & Mark Schweitzer & William Wascher, 2000. "The Effects of Minimum Wages Throughout the Wage Distribution," NBER Working Papers 7519, National Bureau of Economic Research, Inc.
- 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.
- Stewart, Mark B. & Swaffield, Joanna K., 2006.
"The other margin : do minimum wages cause working hours adjustments for low-wage workers?,"
The Warwick Economics Research Paper Series (TWERPS)
746, University of Warwick, Department of Economics.
- 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, 02.
- 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.
- Bhaskar, V & To, Ted, 1999.
"Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition,"
Royal Economic Society, vol. 109(455), pages 190-203, April.
- V. Bhaskar & Ted To, 1996. "Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition," Labor and Demography 9603001, EconWPA, revised 21 May 1996.
- Strobl, Eric & Walsh, Frank, 2007. "Dealing with monopsony power: Employment subsidies vs. minimum wages," Economics Letters, Elsevier, vol. 94(1), pages 83-89, January.
- 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.
- 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.
- 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(s1), pages 607-631, 08.
- 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 607-31, Supplemen.
- 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 C95-C101, 03.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp3643. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If references are entirely missing, you can add them using this form.