Confronting Low Pay: Minimum Wage Policy and Employment in the U.S. and France

University of Massachussetts Amherst - Political Economy Research Institute Working Paper Series Nr. 286

28 Pages Posted: 8 Dec 2012

See all articles by David Howell

David Howell

The New School - Robert J. Milano Graduate School of Management & Urban Policy; Bard College - The Levy Economics Institute

Bert M. Azizoglu

The New School - Robert J. Milano Graduate School of Management & Urban Policy

Anna Okatenko

University College London - CReAM - Centre for Research and Analysis of Migration

Date Written: September 18, 2012

Abstract

Nearly one-third of all American workers are paid very low wages, the highest rate among wealthy nations. An incidence of low pay at this level has obvious implications for the current standard of living for a substantial share of American families. But of particular concern are the implications for the future: the low pay rate has risen precipitously for young male workers with each economic downturn since the late 1970s. In stark contrast, over the last three decades France has adopted a minimum wage policy designed to eliminate low pay, and it has worked: the low-wage share has dropped to just 10 percent. But does the French evidence confirm the conventional prediction that a minimum wage high enough to substantially reduce the incidence of low pay will also eliminate large numbers of jobs for young, less-educated workers? We find no support for this view in the aggregate data. Despite the large and growing gap in the value of the US and French minimum wage since the mid-1990s, French unemployment and employment rates show stability or improvement as well as strong convergence to U.S. levels. Unemployment-to-population rates for US and French 15-24 year olds have closely tracked one another since the mid-1990s. At the same time, the US and French shares of the employed with a wage above the low-wage threshold and not working involuntarily part-time show a steady and substantial divergence in France’s favor, and this appears most dramatically for young less educated workers. France has shown that a rising minimum wage can all but eliminate low paid work without worsening employment opportunities for vulnerable workers. Making work pay for the bottom third of the workforce should be a top priority for American social policy.

Keywords: Minimum Wage, Employment, U.S., France

JEL Classification: J31, J38, J23

Suggested Citation

Howell, David and Azizoglu, Bert Mustafa and Okatenko, Anna, Confronting Low Pay: Minimum Wage Policy and Employment in the U.S. and France (September 18, 2012). University of Massachussetts Amherst - Political Economy Research Institute Working Paper Series Nr. 286, Available at SSRN: https://ssrn.com/abstract=2185937 or http://dx.doi.org/10.2139/ssrn.2185937

David Howell (Contact Author)

The New School - Robert J. Milano Graduate School of Management & Urban Policy ( email )

New York, NY
United States
212-229-5434 (Phone)
212-229-5404 (Fax)

Bard College - The Levy Economics Institute

Blithewood
Annandale-on-Hudson, NY 12504
United States

Bert Mustafa Azizoglu

The New School - Robert J. Milano Graduate School of Management & Urban Policy ( email )

New York, NY
United States

Anna Okatenko

University College London - CReAM - Centre for Research and Analysis of Migration ( email )

Drayton House
30 Gordon Street
London, WC1H 0AX
United Kingdom

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