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Archived - Minimum Wages in canada : theory, evidence and policy

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Footnotes

[1]Many of the theoretical issues and the empirical evidence on the impact of minimum wages is contained in recent comprehensive reviews such as Brown, Gilroy and Kohen (1982), Brown (1999), Card and Krueger (1995) and Kennan (1995).

[2]Landon (1997) provides a clear statement of these opposing forces as well as a review of much of the empirical evidence.

[3]Prasch (1996) gives many of the non-economic arguments on why minimum wages may not reduce employment.

[4]Card (1992a), Neumark and Wascher (1992, 1994), Card, Katz and Krueger (1994), Card and Krueger (1995), Deere, Murphy and Welch (1995).

[5]U.S., Abowd, Kramarz, Lemieux and Margolis (2000) for France and the US, and Campolieti, Fang and Gunderson (2005a, b) and Yeun (2003) for Canada.

[6]In a logistic or probit regression, the change in probability or marginal effect would have to be calculated.

[7]Taylor (1995) and Neumark and Wascher (2000). Earlier studies that involved before-and-after comparisons in low-wage industries or areas are discussed in Brown, Gilroy and Kohen (1982), Brown (1999) and Kennan (1995).

[8] For this reason, their results are not included in the subsequent material on the employment impact. They do find substantial adverse employment effects, with the employment of teenage males in the US being reduced by 7% during 1973-78 because of the minimum wage.

[9]Based on approximately 26 studies reviewed in Brown, Gilroy and Kohen (1982), 28 in Brown (1999) and 29 in Card and Krueger (1995, p. 180-82).

[10]Klerman (1992), Solon (1990), Wellington (1991) and Card and Krueger (1995).

[11]Gilroy and Kohen (1983), but not Zavodny (2000).

[12]Wellington (1991), Brown, Gilroy and Kohen (1982).

[13]Oaxaca (1981), Gramlich (1976), Grossman (1983) and Katz and Krueger (1992).

[14]Card and Krueger (1994), Katz and Krueger (1992) and Wessels (1980).

[15]Neumark and Sicilian (2001).

[16]Gilroy (1981) and Smith and Vavrichek (1987).

[17]Card and Krueger (1995), Johnson and Browning (1983) and Mincy (1990).

[18]Fantl and Whittingham (1970) and Whittingham (1970).

[19]Dungan and Gunderson (1989, p. 4) to arrive at a range whereby a 10% increase in the minimum wage was estimated to increase average wages by a range of 0.187%, 0.306% and 0.650%.

[20]Swidinsky cites a number of the earlier Canadian studies on minimum wages based on survey evidence on how employers said they responded to minimum wages. Most of these studies, as was the case with most of the US studies that also asked employers how they responded, found very little adverse employment effects. One of the problems with such survey evidence, however, is that it is unlikely to pick up dynamic responses as employers may have reduced their growth of such jobs, even though they did not directly engage in layoffs.

[21]It is unknown whether this weaker effect of minimum wages throughout the latter part of the 1970s and early 1980s reflects a structural change in the way minimum wages affected labour markets, or simply the fact that the real minimum had declined by so much (eroded by the fact that the nominal minimum wage was seldom adjusted and hence was eroded by inflation) that it no longer had any impact on employment (Benjamin, 1996, p. 39). It is also possible that there could be an asymmetry in how labour markets respond to an increase in minimum wages (as occurred in the earlier periods) compared to a decline (as occurred in the latter periods). The increases are overt in that they entail an announced increase in the nominal minimum wage. The declines are passive in that they occur through the slow erosion of the minimum through it not being adjusted to keep up with inflation. This passive decline may not elicit a response to expand low-wage employment, especially because employers may not feel that the minimum wage decline is permanent, and that it will soon be offset by upward adjustments, and perhaps substantial ones to offset the cumulative decline.

[22]The evidence was provided by the Research unit of the Federal Labour Standards Review Commission.

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