Optimal minimum wage in the classic labor supply-and-demand paradigm

Rajeev Dehejia; Bjorn N. Jorgensen; Raphael C. Thomadsen

doi:10.1080/10875540802350153

Optimal minimum wage in the classic labor supply-and-demand paradigm

Rajeev Dehejia
, Bjorn N. Jorgensen
, Raphael C. Thomadsen

Research output: Contribution to journal › Article › peer-review

Abstract

This article demonstrates that minimum wage laws need not induce unemployment even under the classic labor supply-and-demand paradigm. As a result, minimum wage laws can be welfare-enhancing under the basic labor supply and demand model, suggesting the presence of an optimal minimum wage. We discuss conditions under which the optimal minimum wage level is the subsistence wage level. As a consequence, minimum wages should vary across states or countries with the local subsistence levels.

Original language	English
Pages (from-to)	481-495
Number of pages	15
Journal	Journal of Poverty
Volume	12
Issue number	4
DOIs	https://doi.org/10.1080/10875540802350153
State	Published - 2008

Keywords

Minimum wage
Unemployment
Wage regulation

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10.1080/10875540802350153

Cite this

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AB - This article demonstrates that minimum wage laws need not induce unemployment even under the classic labor supply-and-demand paradigm. As a result, minimum wage laws can be welfare-enhancing under the basic labor supply and demand model, suggesting the presence of an optimal minimum wage. We discuss conditions under which the optimal minimum wage level is the subsistence wage level. As a consequence, minimum wages should vary across states or countries with the local subsistence levels.

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KW - Wage regulation

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DO - 10.1080/10875540802350153

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Optimal minimum wage in the classic labor supply-and-demand paradigm

Abstract

Keywords

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