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Title:Getting It Right: Employment Subsidy or Minimum Wage? PDF Logo
Authors:Strobl, Eric
Walsh, Frank A.
Issue Date:2003
Series/Report no.:IZA Discussion paper series 662
Abstract:In monopsony models of the labour market either a minimum wage or an employment subsidy financed by a lump sum tax on profits can achieve the efficient level of employment and output. Incorporating working conditions into a monopsony model where higher wages raise firm labour supply, but less attractive working conditions reduce it, changes these policy implications. Specifically, a minimum wage policy could, in contrast to an employment subsidy, cause working conditions to deteriorate and welfare to fall. Empirical evidence from the Republic of Trinidad and Tobago shows that a minimum wage may indeed cause working conditions to worsen.
Subjects:minimum wage
working conditions
monopsony models
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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