Resource title

The Effect of the Minimum Wage on Prices

Resource image

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Resource description

It is well established in the international literature that minimum wage increases compress the wages distribution. Firms respond to these higher labour costs by reducing employment, reducing profits, or raising prices. While there are hundreds of studies on the employment effect of the minimum wage, there is less than a handful studies on its profit effects, and only a couple of dozen studies on its price effects. Not only is the literature scanty on the minimum wage price effects, but also it lacks a survey on that. This survey represents an important contribution to the literature because it summarizes and critically compares over twenty price effect studies, providing a benchmark in the literature. This survey further contributes to the literature by offering an input to the recent debate over the direction of employment effects of the minimum wage. With employment and profits not significantly affected, higher prices is an obvious response to a minimum wage increase. Moreover, this survey also contributes to the literature by extending the current understanding on the minimum wage as a policy against inequality and poverty. If the minimum wage does not cause disemployment but causes inflation, it might hurt rather than aid the poor, who disproportionately suffer from inflation.

Resource author

Sara Lemos

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/20307

Resource license

Adapt according to the presented license agreement and reference the original author.