Employment Cycles, Low Income Work and the Dynamic Impact of Minimum Wages. A Macro Perspective

Peter Flaschel, Alfred Greiner, Camille Logeay and Christian Proaño

No 4-2010, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: In this paper we investigate the macroeconomic consequences of the introduction of an unemployment benefit system and a minimum wage barrier for both skilled and unskilled workers against the background of Goodwin's (1967) model. In the analyzed framework, characterized by free "hiring" and "firing" in the first labor markets, we can show a) that large fluctuations in employment are made (at least partially) socially acceptable through the workfare nature of the unemployment benefit system and b) that minimum real wages provide additional stability to the system dynamics by decreasing the amplitude of the fluctuations in employment and income distribution (and the related degradation of the workforce skills and family structures they are otherwise subject to).

Keywords: Distributive cycles; minimum wages; stability; combined wages; base income; workfare (search for similar items in EconPapers)
JEL-codes: E32 E64 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2010
New Economics Papers: this item is included in nep-lab and nep-mac
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:imk:wpaper:4-2010

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