The consequences of the minimum wage when other wages are bargained over

摘要

This paper examines the impact of a binding minimum wage in a situation where unions dominated by skilled workers set wages. It is shown that the relationship between the minimum wage, the bargained wage and employment of skilled and unskilled workers depends on the magnitude of the elasticity of substitution between skilled and unskilled labor. Cases where minimum wage hikes increase both overall and unskilled employment are exhibited.