Minimum Wages and Employment: Comment

Does increasing the minimum wage lead to employment losses? For many years most economists thought that the answer to this was a straightforward ‘yes’. However, research during the 1990s began to overturn this conventional wisdom and showed that increases in the minimum wage did not automatically lead to employment losses. A recent Australian study, by Leigh (2003), examined the impact of statutory minimum wages in Western Australia and reached conclusions which supported the conventional view. However, close scrutiny of Leigh’s article shows that it is fundamentally flawed. Despite Leigh’s efforts, it remains the case that we simply do not know a great deal about the employment impact of Australia’s system of minimum wages. 1. Debating the Impact of Minimum Wages