Inequality.org

A project of the
Institute for Policy Studies

Increasing the Minimum Wage Can Actually Create Jobs—If It’s Enforced

Back when I studied economics, we “proved” in class that a minimum wage causes unemployment. But that proof depends on assuming a perfectly competitive market. Big low-wage employers like Wal-Mart have substantial market power; they can deliberately under-staff operations to force down wages. In that case, a minimum wage increase can actually create jobs–if it can be enforced.

The Economics Anti-Textbook: A Critical Thinker’s Guide to Microeconomics

It was the perfect “natural experiment:” in April 1992, New Jersey’s minimum-wage was scheduled to rise from $4.25 an hour to $5.05, while neighboring Pennsylvania’s minimum wage remained unchanged.