Minimum Wages and the Level of Employment

Abstract

Most of the studies of the effects of minimum wage laws on the level of employment have concluded, very simply, that in the absence of fortuitous offsetting circumstances, minimum wage legislation must result in unemployment. These analyses, however, have overlooked many other theoretical possibilities which, when adduced, show that these simple results are far from conclusive. This article represents an attempt to point out some of the other possible effects of minimum wage laws on the level of employment. It will not be maintained that minimum wage laws do not, under any circumstances, result in unemployment; rather, it will be suggested that they do not have to have this effect. It is to be seen that minimum wage legislation may have two possible results, namely, the raising of wages under some circumstances or the prevention of a decline in wages in other conditions. The effects, however, are the same in both cases, so that, in pursuing the theoretical examination of the possible consequences of such legislation, wage rises will be analyzed as the relationships between wages and costs of production, and wages and demand are reviewed ultimately with the objective of seeking the effects of these wage changes on production and employment.