A minimum wage is a wage floor set by law or contract, below which employers may not pay workers for their labor. The existence of a wage floor is not disputed; its employment effect genuinely is. The standard supply-and-demand model predicts that a minimum wage set above the market-clearing wage prices some low-skilled workers out of work. David Card and Alan Krueger's 1994 study of fast-food employment in New Jersey and Pennsylvania, comparing New Jersey after it raised its minimum wage against Pennsylvania where the wage was unchanged, found no such negative employment effect, a result that reshaped the field's methodological debate over how minimum-wage effects should be measured and that the entries for Neoclassical Economics and this page's open question carry in more detail.
Facts
Origin YearNew Zealand's Industrial Conciliation and Arbitration Act 1894, the first national minimum-wage law; the entity's own description already covers the modern employment-effect debate this fact does not touch. SignificanceThe existence of a wage floor is not disputed among economists; its employment effect genuinely is, and despite decades of experience and economic research the debate over its costs and benefits continues today, with minimum wage laws generally receiving less support from economists than from the general public. 2 Classification
Concept Form Connections
Associated With School
The standard neoclassical supply-and-demand model treats the minimum wage as a price floor that, if binding, creates unemployment by pricing some low-skilled workers out of the market.
Source Wikipedia
Additional Source Minimum wage (Wikipedia)Minimum wage, Supply and demand model
Open Questions
Source Wikipedia
Additional Source Minimum wage (Wikipedia)Minimum wage, question-of link
Sources
1. Minimum wage (Wikipedia)
lead paragraph, sentence beginning: A minimum wage is the lowest remuneration that employers can
A minimum wage is the lowest remuneration that employers can legally pay their employees-the price floor below which employees may not sell their labor.
History section
Modern national laws enforcing compulsory union membership and prescribing minimum wages for members were first passed in New Zealand in 1894.
- Associated With School: Neoclassical Economics, Minimum wage, Supply and demand model
- Open Questions: Does a Higher Minimum Wage Reduce Low-Wage Employment?, Minimum wage, question-of link
In Group: Labor Market Concepts, Lead
A minimum wage is the lowest remuneration that employers can legally pay their employees-the price floor below which employees may not sell their labor.
View the Source2. Wikipedia
Wikimedia FoundationMinimum wage
if set above the equilibrium price, more labor will be willing to be provided by workers than will be demanded by employers, creating a surplus of labor, i.e., unemployment.
Minimum wage, Lead section
Despite decades of experience and economic research, debates about the costs and benefits of minimum wages continue today.
View the Source Open Questions (1 open question)
Does a Higher Minimum Wage Reduce Low-Wage Employment?
David Card and Alan Krueger's 1994 study of New Jersey and Pennsylvania fast-food employment found no negative employment effect from a minimum-wage increase, contradicting the standard supply-and-demand prediction that a binding wage floor prices low-skilled workers out of work. Neither side has been able to close the dispute: later meta-analyses and replications split along methodological lines, with studies using different comparison groups, time windows and industries reaching different conclusions, so the disagreement persists among credentialed labor economists rather than resting on a factual gap either side denies.
What would resolve this A body of quasi-experimental evidence, across enough minimum-wage changes, industries and regions, and using a comparison-group design both sides of the methodological debate accept, converging on a consistent sign and magnitude for the employment effect.
Labor EconomicsMinimum wage (Wikipedia)
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