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Yang-Ming Chang and Bhavneet Walia
''Wage discrimination and partial compliance with the minimum wage law''
( 2007, Vol. 10 No.4 )
This paper presents a simple model to characterize the discriminatory behavior of a non-complying firm in a minimum-wage economy. In the analysis, the violating firm pays one “favored” group of workers the statutory minimum and the other “non-favored” group of workers a sub-minimum. We find conditions under which law enforcement is ineffective in improving the between-group wage differentials. We show that an increase in the minimum wage raises the sub-minimum wage and employment of workers in the non-favored group, but reduces the employment of workers in the favored group. The effect of the minimum wage increase on total employment is unambiguously negative, however.
JEL: J4 - Particular Labor Markets: General
J7 - Labor Discrimination: General
Manuscript Received : Apr 11 2007 Manuscript Accepted : Apr 12 2007

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