IDEAS home Printed from https://ideas.repec.org/p/lec/leecon/06-9.html
   My bibliography  Save this paper

A Survey of the Effects of the Minimum Wage on Prices

Author

Listed:
  • Sara Lemos

Abstract

It is well established in the literature that minimum wage increases compress the wage distribution. Firms respond to these higher labour costs by reducing employment, reducing profits, or raising prices. While there are hundreds of studies on the employment effect of the minimum wage, there are merely a handful of studies on its profit effects, and only a couple of dozen studies on its price effects. Furthermore, a comprehensive survey on minimum wage price effects is not available in the literature. Given the policy relevance of this neglected issue, in this paper we summarise and critically compare the available evidence on the effects of minimum wages on prices.

Suggested Citation

  • Sara Lemos, 2006. "A Survey of the Effects of the Minimum Wage on Prices," Discussion Papers in Economics 06/9, Division of Economics, School of Business, University of Leicester.
    • Handle: RePEc:lec:leecon:06/9
    as

    Download full text from publisher

    File URL: https://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp06-9.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Welch, Finis R & Cunningham, James, 1978. "Effects of Minimum Wages on the Level and Age Composition of Youth Employment," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 140-145, February.
    2. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
    3. Robert J. Gordon, 1975. "The Impact of Aggregate Demand on Prices," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(3), pages 613-670.
    4. Marvin Goodfriend & Robert G. King, 1997. "The New Neoclassical Synthesis and the Role of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 231-296, National Bureau of Economic Research, Inc.
    5. Machin, Stephen & Manning, Alan & Rahman, Lupin, 2002. "Where the minimum wage bites hard: the introduction of the UK national minimum wage to a low wage sector," LSE Research Online Documents on Economics 20070, London School of Economics and Political Science, LSE Library.
    6. Edward M. Gramlich, 1976. "Impact of Minimum Wages on Other Wages, Employment, and Family Incomes," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(2), pages 409-462.
    7. 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.
    8. Lee, Chinkook & O'Roark, Brian, 1999. "The Impact of Minimum Wage Increases on Food and Kindred Product Prices: An Analysis of Price Pass-Through," Technical Bulletins 184373, United States Department of Agriculture, Economic Research Service.
    9. Walter J. Wessels, 1987. "Minimum Wages, Fringe Benefits, and Working Conditions," Books, American Enterprise Institute, number 917571, September.
    10. Mincer, Jacob, 1976. "Unemployment Effects of Minimum Wages," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 87-104, August.
    11. Haig, Robert Murray & Shoup, Carl, 1934. "“The Sales Tax in the American States”," Business History Review, Cambridge University Press, vol. 8(04), pages 74-75, June.
    12. Gali, Jordi & Gertler, Mark & Lopez-Salido, J. David, 2001. "European inflation dynamics," European Economic Review, Elsevier, vol. 45(7), pages 1237-1270.
    13. Poterba, James M., 1996. "Retail Price Reactions to Changes in State and Local Sales Taxes," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(2), pages 165-176, June.
    14. Gordon, Robert J, 1988. "The Role of Wages in the Inflation Process," American Economic Review, American Economic Association, vol. 78(2), pages 276-283, May.
    15. Laurence Ball & N. Gregory Mankiw & David Romer, 1988. "The New Keynsesian Economics and the Output-Inflation Trade-off," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 1-82.
    16. Daniel Aaronson & Eric French, 2007. "Product Market Evidence on the Employment Effects of the Minimum Wage," Journal of Labor Economics, University of Chicago Press, vol. 25(1), pages 167-200.
    17. Douglas O. Staiger & James H. Stock & Mark W. Watson, 1997. "How Precise Are Estimates of the Natural Rate of Unemployment?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 195-246, National Bureau of Economic Research, Inc.
    18. Besley, Timothy J. & Rosen, Harvey S., 1999. "Sales Taxes and Prices: An Empirical Analysis," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(2), pages 157-178, June.
    19. Lee, Chinkook & Schluter, Gerald E. & O'Roark, Brian, 2000. "How Much Would Increasing the Minimum Wage Affect Food Prices?," Agricultural Information Bulletins 33598, United States Department of Agriculture, Economic Research Service.
    20. Sara Lemos, 2008. "A Survey Of The Effects Of The Minimum Wage On Prices," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 187-212, February.
    21. Sara Lemos, 2004. "Do Minimum Wage Price Effects Hurt the Poor More?," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0(1-2), pages 67-83, January-D.
    22. Sara Lemos, 2006. "Anticipated effects of the minimum wage on prices," Applied Economics, Taylor & Francis Journals, vol. 38(3), pages 325-337.
    23. Daniel S. Hamermesh, 2002. "International Labor Economics," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 709-732, October.
    24. Lee, Chinkook & O'Roark, Brian, 1999. "The Impact of Minimum Wage Increases on Food and Kindred Products Prices: An Analysis of Price Pass-Through," Technical Bulletins 33553, United States Department of Agriculture, Economic Research Service.
    25. Jaewoo Lee, 1997. "The Response Of Exchange Rate Pass-Through To Market Concentration In A Small Economy: The Evidence From Korea," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 142-145, February.
    26. 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.
    27. Layard, P. R. G. & Nickell, S. J., 1985. "Unemployment, real wages, and aggregate demand in Europe, Japan and the United States," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 23(1), pages 143-202, January.
    28. Stephen Machin & Alan Manning & Lupin Rahman, 2003. "Where the Minimum Wage Bites Hard: Introduction of Minimum Wages to a Low Wage Sector," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 154-180, March.
    29. Frye, Jon & Gordon, Robert J, 1981. "Government Intervention in the Inflation Process: The Econometrics of "Self-Inflicted Wounds"," American Economic Review, American Economic Association, vol. 71(2), pages 288-294, May.
    30. Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-649, May.
    31. Eytan Sheshinski & Yoram Weiss (ed.), 1993. "Optimal Pricing, Inflation, and the Cost of Price Adjustment," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262193329, April.
    32. Alan Manning & Ted To, 2002. "Oligopsony and Monopsonistic Competition in Labor Markets," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 155-174, Spring.
    33. Gron, Anne & Swenson, Deborah L, 1996. "Incomplete Exchange-Rate Pass-Through and Imperfect Competition: The Effect of Local Production," American Economic Review, American Economic Association, vol. 86(2), pages 71-76, May.
    34. Poterba, James M., 1996. "Retail Price Reactions to Changes in State and Local Sales Taxes," National Tax Journal, National Tax Association, vol. 49(2), pages 165-76, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sara Lemos, 2004. "The Effects of the Minimum Wage on Prices in Brazil," Labor and Demography 0403011, University Library of Munich, Germany.
    2. Sara lemos, 2004. "The Effect of the Minimum Wage on Prices," Discussion Papers in Economics 04/7, Division of Economics, School of Business, University of Leicester.
    3. Sara Lemos, 2006. "Anticipated effects of the minimum wage on prices," Applied Economics, Taylor & Francis Journals, vol. 38(3), pages 325-337.
    4. Sara Lemos, 2004. "A Menu of Minimum Wage Variables for Evaluating Wages and Employment Effects: Evidence from Brazil," Discussion Papers in Economics 04/3, Division of Economics, School of Business, University of Leicester.
    5. Lemos, Sara, 2009. "Minimum wage effects in a developing country," Labour Economics, Elsevier, vol. 16(2), pages 224-237, April.
    6. Lemos Sara, 2005. "Political Variables as Instruments for the Minimum Wage," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-31, December.
    7. Lemos, Sara, 2004. "The Effects of the Minimum Wage in the Formal and Informal Sectors in Brazil," IZA Discussion Papers 1089, Institute of Labor Economics (IZA).
    8. Sara Lemos, 2004. "Are Wage and Employment Effects Robust to Alternative Minimum Wage Variables?," Discussion Papers in Economics 04/4, Division of Economics, School of Business, University of Leicester.
    9. Sebastian Link, 2019. "The Price and Employment Response of Firms to the Introduction of Minimum Wages," CESifo Working Paper Series 7575, CESifo.
    10. Denis Fougere & Erwan Gautier & Herve Le Bihan, 2010. "Restaurant Prices and the Minimum Wage," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(7), pages 1199-1234, October.
    11. Mirko Draca & Stephen Machin & John Van Reenen, 2011. "Minimum Wages and Firm Profitability," American Economic Journal: Applied Economics, American Economic Association, vol. 3(1), pages 129-151, January.
    12. Daniel Aaronson, 2001. "Price Pass-Through And The Minimum Wage," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 158-169, February.
    13. José Azar & Emiliano Huet & Ioana Marinescu & Bledi Taska & Till von, 2024. "Minimum Wage Employment Effects and Labour Market Concentration," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(4), pages 1843-1883.
    14. Sara Lemos, 2007. "Minimum wage effects across the private and public sectors in Brazil," Journal of Development Studies, Taylor & Francis Journals, vol. 43(4), pages 700-720.
    15. Casey B. Mulligan, 2002. "Capital Tax Incidence: First Impressions from the Time Series," NBER Working Papers 9374, National Bureau of Economic Research, Inc.
    16. repec:eee:labchp:v:3:y:1999:i:pb:p:2101-2163 is not listed on IDEAS
    17. Oliveira, Carlos, 2021. "How is the Minimum Wage Shaping the Wage Distribution: Minimum Wage, Spillovers, and Wage Inequality in Portugal," MPRA Paper 112534, University Library of Munich, Germany.
    18. Arindrajit Dube & Attila Lindner, 2024. "Minimum Wages in the 21st Century," RF Berlin - CReAM Discussion Paper Series 2524, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    19. Marit Hinnosaar & Tairi Room, 2003. "The impact of minimum wage on the labour market in Estonia: an empirical analysis," Bank of Estonia Working Papers 2003-8, Bank of Estonia, revised 12 Oct 2003.
    20. Long, Cheryl & Yang, Jin, 2016. "How do firms respond to minimum wage regulation in China? Evidence from Chinese private firms," China Economic Review, Elsevier, vol. 38(C), pages 267-284.
    21. Schumann, Mathias, 2017. "The effects of minimum wages on firm-financed apprenticeship training," Labour Economics, Elsevier, vol. 47(C), pages 163-181.

    More about this item

    Keywords

    minimum wage; employment; labour costs; cost shock; pass-through;
    All these keywords.

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lec:leecon:06/9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Abbie Sleath (email available below). General contact details of provider: https://edirc.repec.org/data/deleiuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.