Optimal minimum wage in the classic labor supply-and-demand paradigm

Rajeev Dehejia, Bjorn N. Jorgensen, Raphael C. Thomadsen

Research output: Contribution to journalArticlepeer-review

Abstract

This article demonstrates that minimum wage laws need not induce unemployment even under the classic labor supply-and-demand paradigm. As a result, minimum wage laws can be welfare-enhancing under the basic labor supply and demand model, suggesting the presence of an optimal minimum wage. We discuss conditions under which the optimal minimum wage level is the subsistence wage level. As a consequence, minimum wages should vary across states or countries with the local subsistence levels.

Original languageEnglish (US)
Pages (from-to)481-495
Number of pages15
JournalJournal of Poverty
Volume12
Issue number4
DOIs
StatePublished - 2008

Keywords

  • Minimum wage
  • Unemployment
  • Wage regulation

ASJC Scopus subject areas

  • Demography
  • Sociology and Political Science

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