Wage discrimination and partial compliance with the minimum wage law
نویسندگان
چکیده
This paper presents a simple model to characterize the discriminatory behavior of a non-complying firm in a minimum-wage economy. In the analysis, the violating firm pays one “favored” group of workers the statutory minimum and the other “non-favored” group of workers a sub-minimum. We find conditions under which law enforcement is ineffective in improving the between-group wage differentials. We show that an increase in the minimum wage raises the sub-minimum wage and employment of workers in the non-favored group, but reduces the employment of workers in the favored group. The effect of the minimum wage increase on total employment is unambiguously negative, however. Citation: Chang, Yang-Ming and Bhavneet Walia, (2007) "Wage discrimination and partial compliance with the minimum wage law." Economics Bulletin, Vol. 10, No. 4 pp. 1-7 Submitted: April 11, 2007. Accepted: April 12, 2007. URL: http://economicsbulletin.vanderbilt.edu/2007/volume10/EB-07J40001A.pdf
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