Wage discrimination and partial compliance with the minimum wage law

Yang Ming Chang, Bhavneet Walia

Research output: Contribution to journalArticle

2 Scopus citations

Abstract

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.

Original languageEnglish (US)
JournalEconomics Bulletin
Volume10
Issue number4
StatePublished - Apr 12 2007
Externally publishedYes

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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