The Very Idea of Applying Economics: The Modern Minimum-Wage Controversy and Its Antecedents

Minimum Wages and Employment

“…For economists, the new minimum wage represented a means of testing alternative models of the labor market. Indeed, during the period immediately following passage of the FLSA, a fierce debate raged between economists who claimed that the low-wage labor market at the time was best characterized as a competitive market (the "marginalists") and those who claimed that it was not (the "institutionalists"), in which the implications of the minimum wage were a central focus (Leonard, 2000). For example, Stigler (1946), while acknowledging that a higher minimum wage could theoretically raise employment in a labor market characterized by monopsony, argued that the competitive nature of low-wage industries suggested that the displacement of low-wage labor was a more likely outcome.…”

The Impact of Minimum Wage on Average Earnings in the Caribbean Using Two-Selected Countries, Trinidad and Tobago and Jamaica (1980-2011 and 1997-2011)

“…Reputation and credibility effects can do the same job as well. Leonard (1999) argues that minimum wage research has come to be a test of the applicability of neoclassical price theory to the determination of wages and employment. The modern minimum wage controversy is not just a technical quarrel about the sign and magnitude of wage-elasticity coefficients; it is according to the author, the latest chapter in a long methodological discourse over whether and in which domains neoclassical theory can be applied.…”

Three essays on the influence of formal institutions on entrepreneurship.

“…Some individual states adopted a minimum wage prior to the Fair Labor Standard Aet, but often these rules only applied to children and/or female workers (Leonard, 2000). Even though a national minimum wage is in effect in the u.S. today, many states have their own minimum wage rates as well (Karabegovic et ai., 2005).…”

“…If the minimum wage rate rises above the marginal revenue generated by workers, then they are likely to be laid off (if working for a firm) or not hired (if not working for a firm) (Leonard, 2000). Thus, high minimum wages in a state are likely to lead to lower levels of employment relative to firms in low minimum wage states.…”

“…If the minimum wage rises above the marginal revenue that the employee(s) generate, then firm employment levels are likely to fall (Leonard, 2000). In addition to lowering firm employment levels, high minimum wages may even cause some firms to go out of business if they lower the expected performance of the firm below the threshold level.…”