Friday, December 18, 2015

Neumark on the employment impact of an increase in the minimum wage

http://www.wsj.com/articles/the-evidence-is-piling-up-that-higher-minimum-wages-kill-jobs-1450220824

If a 10% increase in the minimum wage reduces teen-age and low-skill employment by 2%,

  1. What is the price elasticity of the demand for labor?
  2. What would happen to the unemployment rate for teen-age and low-skill workers when the minimum wage increases from $7.15 to $10.10? Assume that no workers become discouraged and drop out of the labor market?

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