THE ECONOMICS OF A BITING MINIMUM WAGE

摘要

Conventional wisdom as regards the effects of a biting Minimum Wage(MW) is challenged in this paper through the findings of a System Dynamics model.Given a number of different plausible assumptions, a number of counter intuitiveresults are found to emerge such as a longer term permanent increase in employmentlevels, a greater total number of businesses in the economy associated with lowertotal employment levels than originally, and a trade-off in the well being and theemployment levels between those firms whose cost structure was affected by the MWand the unaffected firms. Finally, two variables that are normally considered to beirrelevant to the investigation of the economic effects of a biting MW, namelyconsumption spending and fixed costs per business, come to the forefront of theanalysis.