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Minimum Wages and Employment
Foundations and Trends® in
Microeconomics
Volume 3 Issue 1–2
DOI: 10.1561/0700000015
Minimum Wages and Employment
David Neumark
Department of Economics,
3151 Social Science Plaza,
University of California-Irvine, Irvine, CA 92697,
USA,
dneumark@uci.edu
William L. Wascher
Board of Governors of the Federal Reserve System,
Division of Research and Statistics,
20th Street and Constitution Ave.,
NW, Washington, DC 20551, USA,
william.l.wascher@frb.gov
Abstract
We review the burgeoning literature on the employment effects of minimum wages - in the United States and in other countries - that
was spurred by the new minimum wage research beginning in the early 1990s. Our review indicates that there is a wide range
of existing estimates and, accordingly, a lack of consensus about the overall effects on low-wage employment of an increase
in the minimum wage. However, the oft-stated assertion that recent research fails to support the conclusion that the minimum
wage reduces employment of low-skilled workers is clearly incorrect. A sizable majority of the studies surveyed in this monograph
give a relatively consistent (although not always statistically significant) indication of negative employment effects of
minimum wages. In addition, among the papers we view as providing the most credible evidence, almost all point to negative
employment effects, both for the United States as well as for many other countries. Two other important conclusions emerge
from our review. First, we see very few - if any - studies that provide convincing evidence of positive employment effects
of minimum wages, especially from those studies that focus on the broader groups (rather than a narrow industry) for which
the competitive model generally predicts disemployment effects. Second, the studies that focus on the least-skilled groups
that are likely most directly affected by minimum wage increases provide relatively overwhelming evidence of stronger disemployment
effects for these groups.
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