The Issue Isn't the Minimum Wage, but the Effective Minimum Wage Population

September 17, 2013

The minimum wage has recently been in the news because of the fast-food workers’ strike for $15 an hour. Critics claim that would cause unemployment. There is a tipping point, but we don't really know where that is. The principal reason minimum wage increases have not led to disemployment effects is that the minimum has been so far below a market clearing wage. In the case of the fast-food industry increases, so long as they are below the tipping point, they are likely to lead to increases in employment because the fast-food industry is a labor monopsony. That is, they are the principal employers of minimum wage workers.

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