The debate over the economic effects of the legislation on minimum wage

Abstract

The institution of minimum wage has been, since its birth in the first third of the last century, the subject of on going controversy in the economics profession, with ever unfinished on its effects on macroeconomic balances and, in short, debate on the dynamics of economic growth.

In recent years, this debate has again intensified as a result of labour deregulation in promotion that has been imposed in developed countries, which, in a depressive context, has resulted in inequalities growing. In this situation there are many voices raised again in favour of the restoration of this institution as a way of ensuring minimum levels of income for some increasingly depauperized employees.

This article reviews the theoretical debate and empirical literature on the effects of minimum wages on employment and other macroeconomic variables is made. After this it is concluded that the thorough investigation made in this regard appears not to be conclusive and unequivocal results on those effects, prevailing rather the ambiguity in the empirical results, if not contrary evidence against most conventional economic theory forecasts. Therefore, labour policies are facing to present austerity strategies moving the centre of its proposals to improve minimum wage institutions o revaluated it in order to reduce income distribution inequalities and even to downsize poverty levels.