Unemployment Effects of Minimum Wages

Abstract

Empirical investigation of employment effects of minimum wage legislation is a subject of continuing interest, judging by a growing number of studies. The older studies were concerned mainly with changes in employment in low-wage industries. In the more recent work, attention has shifted to effects on unemployment in low-wage demographic groups, such as teenagers. Despite the statistical difference there is no apparent recognition of a conceptual as well as substantive distinction between minimum wage effects on employment and those on unemployment. The purpose of this paper is to explore the analytical distinction between employment and unemployment effects in the hope of providing some understanding of the observations. Though related empirical work is far from being definitive the findings appear to be informative.