Article

Family Values and the Regulation of Labor

National Bureau of Economic Research, Inc, NBER Working Papers 01/2010;
Source: RePEc

ABSTRACT This paper shows that increases in the minimum wage rate can have ambiguous effects on the working hours and welfare of employed workers in competitive labor markets. The reason is that employers may not comply with the minimum wage legislation and instead pay a lower subminimum wage rate. If workers are risk neutral, we prove that working hours and welfare are invariant to the minimum wage rate. If workers are risk averse and imprudent (which is the empirically likely case), then working hours decrease with the minimum wage rate, while their welfare may increase.

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Keywords

competitive labor markets
 
empirically likely case
 
employers
 
imprudent
 
increases
 
lower subminimum wage rate
 
minimum wage legislation
 
minimum wage rate
 
working hours