The Economics of Minimum Wages

This Public Policy Source provides a review of the economics of minimum wage laws and, in particular, of the empirical literature on some of the economic impacts of minimum wage laws. It also provides an overview of the Canadian data on who earns the minimum wage. By examining the incidence of the minimum wage, it is possible to determine whether the minimum wage is likely to achieve its official objective of raising the incomes of the poor.Most economists would likely agree that high minimum wages reduce employment opportunities for young and unskilled workers. Most would probably also agree that high minimum wages do not necessarily raise the incomes of the poorest members of society. Yet, in spite of this consensus about the economics of minimum wages, the minimum wage continues to be touted by politicians and policy-makers as an effective way to help the poor. This is puzzling, since the adverse economic impacts of the minimum wage have been extensively documented.

This Public Policy Source provides a review of the economics of minimum wage laws and, in particular, of the empirical literature on some of the economic impacts of minimum wage laws. It also provides an overview of the Canadian data on who earns the minimum wage. By examining the incidence of the minimum wage, it is possible to determine whether the minimum wage is likely to achieve its official objective of raising the incomes of the poor.