The Minimum Wage and a Non-Competitive Market for Qualifications

Gauthier Lanot and Panos Sousounis ()
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Panos Sousounis: Keele Management School, Postal: Keele University, Keele, ST5 5BG, UK

No 906, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: In this paper we consider an equilibrium model of demand and supply for several qualifications first in a competitive setting and then in a non-competitive setting. We propose a tractable analytical framework, i.e. when workers choose between qualifications according to a multinomial logit model of choice and when a CES production function describes the substitutions possibilities between the different types of labour. While in the competitive case the effects of the minimum wage are those we expect, in the imperfectly competitive case we find that a minimum wage can create unemployment and we find that the welfare of the population as a function of the minimum wage is not unimodal. We show furthermore that allowing one qualification to be exempted from the minimum wage does not mean that its relative demand is unaffected by changes to the minimum wage.

Keywords: Minimum wage; wage differentials; segmented labour markets; monopsony (search for similar items in EconPapers)
JEL-codes: J31 J38 J42 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2015-04-08
New Economics Papers: this item is included in nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:umnees:0906

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