A SURVEY OF THE EFFECTS OF THE MINIMUM WAGE ON PRICES

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 mer...

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Bibliographic Details
Published in:Journal of economic surveys 2008-02, Vol.22 (1), p.187-212
Main Author: Lemos, Sara
Format: Article
Language:English
Subjects:
Competitiveness
Cost shock
Economic theory
Employment
Income distribution
Labor costs
Labor economics
Labour costs
Minimum wage
Minimum wages
Pass-through
Price rises
Prices
Profit
Profits
Studies
Wages & salaries
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Summary: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 summarize and critically compare the available evidence on the effects of minimum wages on prices.
ISSN:0950-0804
1467-6419
DOI:10.1111/j.1467-6419.2007.00532.x