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  • February 2021 Newsletter
 
What are the benefits of higher minimum wages?
View this email online
IZA World of Labor logo
Employment effects of minimum wages

When minimum wages are introduced or raised, are there fewer jobs?

The potential benefits of higher minimum wages come from the higher wages for affected workers, some of whom are in poor or low-income families. The potential downside is that a higher minimum wage may discourage firms from employing the low-wage, low-skill workers that minimum wages are intended to help. If minimum wages reduce employment of low-skill workers, then minimum wages are not a “free lunch” with which to help poor and low-income families, but instead pose a trade-off of benefits for some versus costs for others. 

Although a minimum wage policy is intended to ensure a minimal standard of living, unintended consequences undermine its effectiveness. IZA World of Labor author David Neumark has consulted the evidence and whilst the findings are not unanimous, the statistics suggest that minimum wages reduce the jobs available to low-skill workers.

Here some of the pros and cons discussed in his article:

Pros:

  • Minimum wages may help policymakers address public demands to combat rising inequality.

  • Minimum wages deliver earnings gains for some workers.

  • Some of the workers who gain from minimum wages are in poor or low-income families.

  • Some studies do not find that minimum wages lead to fewer jobs.


 

Cons:

  • Increasing amounts of evidence from the US indicate that higher minimum wage levels lead to fewer jobs.

  • Studies that focus on the least-skilled workers find the strongest evidence that minimum wages reduce jobs.

  • Targeted tax credits do a better job of reaching the poor than minimum wages do.

  • Low-paying jobs requiring low skills are the jobs most likely to decline with increased minimum wages.

  • In the US, most evidence does not indicate that minimum wages help poor or low-income families, or reduce most forms of public assistance.

 

Read David Neumark's full article: 
Employment effects of minimum wages (Deutsch) (Español)

 
 

Read other articles and opinion pieces
on minimum wages:

Minimum wages hurt young people

Minimum wages hurt young people 
- opinion piece

by Charlene Marie Kalenkoski

Does increasing the minimum wage reduce poverty in developing countries?

Does increasing the minimum wage reduce poverty in developing countries? 
- opinion piece

by T. H. Gindling

Does increasing the minimum wage reduce poverty in developing countries?

Does increasing the minimum wage reduce poverty in developing countries? (Deutsch) (Español) - article

by T. H. Gindling

The minimum wage versus the earned income tax credit for reducing poverty

The minimum wage versus the earned income tax credit for reducing poverty (Deutsch)
- article

by Richard V. Burkhauser

How are minimum wages set?

How are minimum wages set? (Deutsch)
- article

by Richard Dickens

Do minimum wages stimulate productivity and growth?

Do minimum wages stimulate productivity and growth? (Deutsch) (Español)
- article

by Joseph J. Sabia

What are the effects of minimum wages? 
Consult our key topics page.

 
 

Consult our key topic pages to find relevant articles, opinion pieces and videos on topics such as
employment protection and female labor force participation,
amongst others.

Key topic pages
 
 

Read some of our recent commentaries:

Covid-19’s impacts on the US labor market

Covid-19’s impacts on the US labor market

The Covid-19 pandemic disrupted US labor markets more severely and more quickly than at any point in living memory.

The impact of Covid-19 on the life insurance market was minimal

The impact of Covid-19 on the life insurance market was minimal

In March 2020, the entire world was grappling with the enormity of the coronavirus pandemic. Its effects rippled into other markets, including insurance markets.

Exposure to epidemics and trust in scientists

Exposure to epidemics and trust in scientists

Distrust of scientific experts is a problem, one that will be even more acute post Covid-19.

Measuring the effects of the Covid-19 pandemic on domestic violence

Measuring the effects of the Covid-19 pandemic on domestic violence

Around the world, policymakers and news reports have warned that domestic violence could increase as a result of the Covid-19 pandemic.

Assessing the effect of online instruction on university students’ learning

Assessing the effect of online instruction on university students’ learning

Despite learning losses from pandemic-induced disruptions, our findings leave us optimistic for future student learning.

Sexual harassment in the post-Covid-19 work environment

Sexual harassment in the post-Covid-19 work environment

Will sexual harassment in the workplace become less important in the post-Covid-19 work environment?

Pandemic meets pollution: The role of air quality for COVID-19

Pandemic meets pollution: The role of air quality for Covid-19

Higher levels of air pollution increase the number of deaths.

How to play it safe? The gender gap in aversion to Covid-19 exposure

How to play it safe? The gender gap in aversion to Covid-19 exposure

Focusing on gender differences in labor market outcomes may underestimate the true gender impact of Covid-19

How was the US presidential election affected by the Covid-19 pandemic?

How was the US presidential election affected by the Covid-19 pandemic?

At least in the case of Covid-19 in the US, political leaders’  (mis-)handling of negative shocks matters to voters and elections.

The impact of a Covid-19 lockdown on happiness

The impact of a Covid-19 lockdown on happiness

Analyzing the well-being impact of Covid-19 is complex.

For commentary on the effects of Covid-19 see
Covid-19: Pandemics and the labor market.

See National responses to Covid-19 for expert perspectives on the effects of the pandemic on individual countries or cities.

 
 

Read our latest news stories:

The unemployment rate in Africa rises to 32.5%

The unemployment rate in Africa rises to 32.5%

In addition, in 2020, those with lower levels of education were more likely to have had their salaries reduced than those who have higher levels of education.

Brexit causes admin and financial chaos for UK language students

Brexit causes admin and financial chaos for UK language students

Brexit red tape and costs are disrupting academic travel plans.

Two million people have not worked for at least six months, according to study

Two million people have not worked for at least six months, according to study

In January, almost two million workers in the UK were classified as unemployed, or fully furloughed for at least six months.

New WTO chief warns against “vaccine nationalism”

New WTO chief warns against “vaccine nationalism”

“[A] phenomenon where rich countries are vaccinating their populations and poor countries have to wait” must be avoided.

Fossil fuels were responsible for 8.7million deaths globally in 2018, research finds

Fossil fuels were responsible for 8.7 million deaths globally in 2018, research finds

Air pollution caused by the burning of fossil fuels is accountable for one in five deaths globally.

Businesses led by ethnic-minority entrepreneurs contribute £74 billion a year to UK economy

Businesses led by ethnic-minority entrepreneurs contribute £74 billion a year to UK economy

Businesses led by ethnic-minority entrepreneurs contribute at least £74 billion to the UK each year.

UK coronavirus support “repeatedly skewed towards men,” says new report

UK coronavirus support “repeatedly skewed towards men,” says new report

Women and Equalities Committee chair Caroline Nokes says UK government must analyze and assess the equality impact of every coronavirus policy, "or it risks turning the clock back.”

Millions of workers in the United States could receive $15 federal minimum wage

Millions of workers in the United States could receive $15 federal minimum wage

Millions of workers in the US are potentially going to get a pay rise as Democrats are looking to pass a $15 federal minimum wage without support from the Republican party.

America’s recession reveals failures in retraining provisions

America’s recession reveals failures in retraining provisions

The US invests less in workforce development as a portion of GDP than many other developed nations.

2020 working hour losses were four times greater than during the ’09 financial crisis

2020 working hour losses were four times greater than during the ’09 financial crisis

8.8% of all work hours around the world were lost in 2020.

 
 

Latest articles
 

 

  • Do labor costs affect companies’ demand for labor? (Deutsch) by Daniel S. Hamermesh

  • Statistical profiling of unemployed jobseekers (Deutsch) by Bert van Landeghem, Sam Desiere and Ludo Struyven

  • Correspondence testing studies (Deutsch) by Dan-Olof Rooth

  • Individual and family labor market impacts of chronic diseases (Deutsch) by Amanda Gaulke

  • The effect of overtime regulations on employment (Deutsch) by Ronald L. Oaxaca and Galiya Sagyndykova

  • Health effects of job insecurity (Deutsch) (Español) by Francis Green

  • Do immigrants improve the health of native workers? (Deutsch) (Español) by Osea Giuntella

  • Encouraging women’s labor force participation in transition countries (Deutsch) (Español) by Norberto Pignatti

  • Impacts of regulation on eco-innovation and job creation (Deutsch) (Español) by Jens Horbach

  • Public sector outsourcing (Deutsch) (Español) by Panu Poutvaara and Henrik Jordahl

  • Racial wage differentials in developed countries (Deutsch) by Simonetta Longhi 


All one-pagers are also available to read and download in German.
Find out more.

One-pagers are now available in Spanish. Take a look at the
Spanish key topics page.

 
 

Upcoming events:

 

  • 8th IZA Workshop: Environment, Health and Labor Markets, March 1 2021 - Online

  • 4th IZA Labor Statistics Workshop: Measurement of Labor Market Conditions, April 22-24 - Online

  • SOLE's 26th Annual Meeting, May 14-15 2021 - Philadelphia, United States

  • 17th IZA Annual Migration Meeting, May 28-29 2021 - Online

  • 4th IZA/Higher School of Economics Workshop: Thirty Years after the Fall of the Iron Curtain: The Contribution of Labor Market Adjustment to Transition and Convergence, June 30 - Online

  • IZA Workshop: Labor Market Institutions, September 03-04 2021 - Online

  • World Employment Conference 2020: Steering a labour market in transformation, September 07-08 2021 - Madrid, Spain

  • 33rd Annual Conference of the European Association of Labour Economists, Sept 16-18 2021 - Padua, Italy

  • 4th IDSC of IZA Workshop: Matching Workers and Jobs Online - New Developments and Opportunities for Social Science and Practice, October 08 - Online

 
 

Articles relating to pandemics and the labor market:

  • Why does part-time employment increase in recessions? (Deutsch) (Español) by Daniel Borowczyk-Martins

  • Health effects of job insecurity (Deutsch) (Español) by Francis Green

  • Short-time work compensation schemes and employment (Deutsch) (Español) by Pierre Cahuc

  • Do youths graduating in a recession incur permanent losses? (Deutsch) (Español) by Bart Cockx

  • The relationship between recessions and health (Deutsch) by Nick Drydakis

  • Effects of entering adulthood during a recession (Deutsch) by Lisa Dettling

 
 

The Covid-19 pandemic is likely to have lasting economic and social impacts on employment, income, and working conditions in labor markets around the world.

IZA has therefore invited a number of experts to monitor individual countries' crisis responses on their
Crisis Response Monitoring site:

IZA Crisis Response Monitoring
 
 

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