The Ambiguous Effect of Minimum Wages on Workers and Total Hours

25 Pages Posted: 18 Aug 2008

See all articles by Eric Strobl

Eric Strobl

École Polytechnique, Paris - Department of Economic Sciences; IZA Institute of Labor Economics

Frank Walsh

National University of Ireland - University College Dublin

Abstract

We model a competitive labour market where firms choose combinations of workers and hours per worker to produce output. If one assumes that the scale of production has no impact on hours per worker, then the change in the number of workers and hours per worker resulting from a minimum wage are inversely related. We demonstrate that total hours worked at the firm may rise for plausible parameter values if there are small fixed costs to hiring workers. Thus, in contrast to the conventional view, we show that the effect of minimum wages on employment is ambiguous.

Keywords: minimum wages, hours, employment

JEL Classification: J22, J38

Suggested Citation

Strobl, Eric and Walsh, Frank, The Ambiguous Effect of Minimum Wages on Workers and Total Hours. IZA Discussion Paper No. 3643, Available at SSRN: https://ssrn.com/abstract=1230830 or http://dx.doi.org/10.2139/ssrn.1230830

Eric Strobl (Contact Author)

École Polytechnique, Paris - Department of Economic Sciences ( email )

Ecole Polytechnique
Department of Economics
Paris, 75005
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Frank Walsh

National University of Ireland - University College Dublin ( email )

Department of Economics
Belfield
Dublin 4
Ireland
353-1-7068697 (Phone)
353-1-2830068 (Fax)

HOME PAGE: http://www.ucd.ie/~economic/staff/fwalsh/

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