The economic case for a minimum wage

Policy Brief

The right-wing and neo-liberals are claiming that minimum wage is a counter-productive measure as it increases labour costs, and therefore unemployment. A quick look to the academic literature shows that it is not necessarily the case. In most cases, minimum wage has almost no effect on employment. In some cases, the effect on employment is even positive. Furthermore, a minimum wage tends to decrease wage dispersion and therefore is an efficient tool to tackle inequalities. As other labour market institutions, it can be argued that a minimum wage is part of a predistribution policy, aiming at tackling pre-tax inequalities. The case for a European-wide minimum wage is strong as it minimizes the adverse effects of social dumping induced by pro-competitiveness policies conducted simultaneously by most European countries. 

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