The Minimum Wage Can Harm Workers by Reducing Unemployment

Dwight R. Lee

Journal of Labor Research, 2004, vol. 25, issue 4, 657-666

Abstract: Economists may disagree over how much raising the minimum wage increases unemployment, though few argue that the unemployment effect is zero. According to the standard model, the less the unemployment caused by a minimum wage increase, the less the harm (or greater the good) that results. But by recognizing that minimum wage workers receive fringe benefits, I show that increasing the minimum wage may not cause any unemployment and harms workers because it doesn't. Furthermore, when there is lumpiness in providing fringe benefits, a minimum wage increase may harm workers by reducing unemployment.

Date: 2004
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