Wage discrimination and partial compliance with the minimum wage law

Yang-Ming Chang and Bhavneet Walia ()
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Bhavneet Walia: Kansas State University

Economics Bulletin, 2007, vol. 10, issue 4, 1-7

Abstract: This paper presents a simple model to characterize the discriminatory behavior of a non-complying firm in a minimum-wage economy. In the analysis, the violating firm pays one “favored” group of workers the statutory minimum and the other “non-favored” group of workers a sub-minimum. We find conditions under which law enforcement is ineffective in improving the between-group wage differentials. We show that an increase in the minimum wage raises the sub-minimum wage and employment of workers in the non-favored group, but reduces the employment of workers in the favored group. The effect of the minimum wage increase on total employment is unambiguously negative, however.

JEL-codes: J4 J7 (search for similar items in EconPapers)
Date: 2007-04-12
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Citations: View citations in EconPapers (2)

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