The Impact and Relevance of Minimum Wage Laws

Jinyang Zhang
ECO-202
Prof. Fionte
12/10/2020
BHCC Microeconomics -The Impact and Relevance of Minimum Wage Laws
Background and introduction on minimum wages
The Fair Labor Standards Act (FLSA) of 1938 covers some workers who are entitled to the minimum wage except for some employees such as highly-compensated individuals, employees of government agencies, public corporations, executives, professionals, administrators, and those working in the judicial and legislative branches. Besides the minimum wage, the FLSA focuses on pay, hours worked, equal pay, overtime, and record-keeping, and child labor.  FLSA-2004 regulations changes required that those being $23,660 annually be paid overtime if they worked more than 40 hours in a week, while those earning $100,000 were exempt (BT LG). There are social welfare, employment, and economic effects of minimum wage laws, and evaluating their impact on employees and employees provides insight on the effectiveness of these laws.
Review of literature
In some countries, the minimum wage is one of the main instruments to reduce poverty and inequality and is targeted towards the benefits the low-paid workers. In some cases, the minimum wage is aimed at improving labor productivity and correcting the labor market inefficiencies. Differences in labor market concentration levels mean that the minimum wage does not always have a negative impact on unemployment in highly concentrated markets (Azar et al. 13). There are arguments made for and against increasing the minimum wage level, and from theoretical and empirical approaches, research shows that the effect of the minimum wage on the labor market and productivity can be positive, negative, or ambiguous. Thus, a review of literature is useful to evaluate the impact of the minimum wage on unemployment and indicators of labor demand.
The least-skilled workers are most likely to be affected by increases in the minimum wage are the least skilled workers. As such, the effects of rising minimum wage disproportionately affect groups of workers who work in jobs that require few transferable skills, including the youth, women, youth, and inexperienced workers. For these workers, improving their labor productivity would likely require training and adopting more skills. Nonetheless, changes in the minimum wage laws have minimal adverse effects on employment when the minimum wage is already low, and at times, there is a reduced probability of unemployment. Jardim et al. (32) found out that an increase in the minimum wage level resulted in low-skilled workers in Seattle foregoing employment opportunities when considering elasticity of employment, the effect of higher hourly gain. The effects of the increase in the minimum wage are also largely on the industry, the type and size of business. Considering differences in unemployment over years, regions, and specific industries provided insights on the trends and patterns of employment when wage laws were implemented.
Characteristics of the US labor market at the time the wage laws were adopted influenced the level of unemployment as there has been a decline in the high-wage unionized manufacturing jobs over decades. According to Schmitt (575), there have been modest increases in the US mi...