Re: Help with a Minimum Wage Model

From: Damien Sullivan (phoenix@ugcs.caltech.edu)
Date: Sat Apr 05 2003 - 20:45:00 MST

  • Next message: Rafal Smigrodzki: "Re: Help with a Minimum Wage Model"

    > Lee Corbin writes:
    >
    > > I would like some help with a model in which minimum wage
    > > laws would have a positive effect on the wealth of, if not
    > > society, then the lowest wage earners.

    I know some economists have done stuff like this already. I have a vague
    memory of the mechanism being something like
    o raising minimum wage gives more money to workers, possibly unemploying some
    o but workers spend the money they get, vs. the rich people the money was taken
    from who saved most of it
    o so demand increases, calling for more workers to be employed to satisfy
    demand.

    Another angle might be to throw out the assumption of a perfect market. The
    whole thing of equilibrium price and minimum wage being a price floor above
    that comes out of models of perfectly competitive markets, at least in simple
    analyses. But if employers are an oligopoly -- market power and all that --
    raising the legal wage might just shift some of the profits to the workers,
    without causing unemployment.

    I don't claim that's a solid idea, just an angle I can think of. Hopefully
    I'll stay out of arguments about this, since there's real literature I haven't
    read on the subject.

    -xx- Damien X-)



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