Abstract
This paper shows that increases in the minimum wage rate can have ambiguous effects on the working hours and welfare of employed workers in competitive labor markets. The reason is that employers may not comply with the minimum wage legislation and instead pay a lower subminimum wage rate. If workers are risk neutral, we prove that working hours and welfare are invariant to the minimum wage rate. If workers are risk averse and imprudent (which is the empirically likely case), then working hours decrease with the minimum wage rate, while their welfare may increase.
| Original language | English |
|---|---|
| Pages (from-to) | 625-630 |
| Number of pages | 6 |
| Journal | Labour Economics |
| Volume | 16 |
| Issue number | 6 |
| DOIs | |
| State | Published - 1 Dec 2009 |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 8 Decent Work and Economic Growth -
SDG 10 Reduced Inequalities
Keywords
- Competitive labor markets
- Minimum wage
- Noncompliance
- Welfare
- Working hours
ASJC Scopus subject areas
- Economics and Econometrics
- Organizational Behavior and Human Resource Management
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