On the Economics of Compliance with the Minimum Wage Law

9 Pages Posted: 7 Feb 2007

See all articles by Yang-Ming Chang

Yang-Ming Chang

Kansas State University - Department of Economics

Isaac Ehrlich

State University of New York at Buffalo - Department of Economics; National Bureau of Economic Research (NBER); University of Chicago - University of Chicago Press; Institute for the Study of Labor (IZA)

Abstract

This paper reexamines the issues of compliance with and enforcement of the minimum wage law recently addressed in this Journal by Ashenfelter and Smith and by Grenier. Pursuing a more rigorous methodology we are able to add new general conclusions, and correct and reconcile some previous conflicting conclusions concerning the role of the disparity between the minimum and free market wages, the level and elasticity of labor demand, and the magnitude of deterring monetary sanctions on the noncompliance decision. Our formulation also addresses the law evasion (reduced wages) as well as the law avoidance (modified employment) aspects of the noncompliance decision, which previous formulations have ignored.

Suggested Citation

Chang, Yang-Ming and Ehrlich, Isaac, On the Economics of Compliance with the Minimum Wage Law. Journal of Political Economy, Vol. 93, No. 11, pp. 84-91, February 1985, Available at SSRN: https://ssrn.com/abstract=961484

Yang-Ming Chang (Contact Author)

Kansas State University - Department of Economics ( email )

Manhattan, KS 66502-4001
United States
785-532-4573 (Phone)

HOME PAGE: http://www.k-state.edu/economics/facsheets/chang.htm

Isaac Ehrlich

State University of New York at Buffalo - Department of Economics ( email )

415 Fronczak Hall
Buffalo, NY 14260
United States
716-645 2121 (Phone)
716-645 2127 (Fax)

HOME PAGE: http://arts-sciences.buffalo.edu/economics/faculty/faculty-directory/ehrlich.html

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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University of Chicago - University of Chicago Press ( email )

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Chicago, IL 60637
United States

Institute for the Study of Labor (IZA) ( email )

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

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