MYTHS ABOUT THE MINIMUM WAGE关于最低工资的神话.docVIP

THE ECONOMICS OF THE MINIMUM WAGE Philip Lewis* The effects of imposing a minimum wage is one of the most emotive and, yet, least understood issues in economic and labour market debates. Given the importance of this issue particularly in the context of the recent ACTU’s Living Wage Case, it is timely to provide a reasoned analysis of the impacts of minimum wages. The starting point here is the standard neoclassical analysis. The clue to understanding the minimum wage debate is the nature of the labour market. The concept of the labour market is an abstract one but is nevertheless useful for analysing issues such as the overall level of employment and unemployment. Every economics student will be familiar with the standard textbook treatment represented by Figure 1 below. Figure 1: The aggregate labour market This shows that if average wages are held at a minimum then labour supply, NS, exceeds labour demand, ND, and, therefore, unemployment results. There is considerable empirical research on the labour market in Australia and the effect of rises in average wages on employment (see, for instance Lewis and Seltzer 1996). This research indicates that a 10 per cent increase in average wages reduces employment by about 8 per cent. Thus, moderation in average wages increases employment and, with the usual caveat that all other things are equal, unemployment will fall. It is tempting to use the above analysis to examine the effects of imposing a minimum wage for the lower paid. However, the above analysis is not appropriate. Since most workers would obtain a wage higher than the minimum anyway, the effect of imposing a minimum wage is to increase the wages only of those who would otherwise receive the lowest wages. The effect on the average wage is small and, thus, the impact on employment and unemployment is also small. This theoretical argument is supported by international empirical evidence which shows that the impacts of minimum wages on total employment