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The Detrimental Side Effects of Minimum Wage Laws

Authors

  • Claire Hovenga,

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    • Claire Hovenga is a Research Assistant, Joseph A. Butt, S.J. College of Business, Loyola University New Orleans, New Orleans, LA. E-mail: cmhoveng@loyno.edu. Devaja Naik is a Research Assistant, Joseph A. Butt, S.J. College of Business, Loyola University New Orleans, New Orleans, LA. E-mail: dsnaik@loyno.edu. Walter E. Block is Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics, Joseph A. Butt, S.J. College of Business, Loyola University New Orleans, New Orleans, LA. E-mail: wblock@loyno.edu. http://www.walterblock.com/.
  • Devaja Naik,

    Search for more papers by this author
    • Claire Hovenga is a Research Assistant, Joseph A. Butt, S.J. College of Business, Loyola University New Orleans, New Orleans, LA. E-mail: cmhoveng@loyno.edu. Devaja Naik is a Research Assistant, Joseph A. Butt, S.J. College of Business, Loyola University New Orleans, New Orleans, LA. E-mail: dsnaik@loyno.edu. Walter E. Block is Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics, Joseph A. Butt, S.J. College of Business, Loyola University New Orleans, New Orleans, LA. E-mail: wblock@loyno.edu. http://www.walterblock.com/.
  • Walter E. Block

    Search for more papers by this author
    • Claire Hovenga is a Research Assistant, Joseph A. Butt, S.J. College of Business, Loyola University New Orleans, New Orleans, LA. E-mail: cmhoveng@loyno.edu. Devaja Naik is a Research Assistant, Joseph A. Butt, S.J. College of Business, Loyola University New Orleans, New Orleans, LA. E-mail: dsnaik@loyno.edu. Walter E. Block is Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics, Joseph A. Butt, S.J. College of Business, Loyola University New Orleans, New Orleans, LA. E-mail: wblock@loyno.edu. http://www.walterblock.com/.

  • JEL category: J64
  • The authors wish to thank Nick Egan for editing an earlier version of this article. All remaining errors are of course our own responsibility. We also thank two referees of this journal for comments and suggestions which helped us greatly improve this article. All remaining errors and infelicities of course remain the responsibility of the authors.

Abstract

The adverse effects of minimum wage legislation demonstrate how a government policy presumably intended to help people worst off in society can actually end up causing far more harm than good. In this case, the victims are unskilled laborers. By making it illegal for employers to pay unskilled workers wages equal to their marginal revenue productivity, it causes unemployment for all workers whose productivity happens to be below the minimum wage. It also widens the wage gap between whites and minorities because there are disproportionate numbers of unskilled and uneducated minorities compared with whites.

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