The budgetary effects of the minimum wage

• Authors: Halpern L. , Koren M. , Korosi G. , Vincze J.
• Languages of publication: HU

Abstracts

EN

Raising the minimum wage on the labour market has direct effects on supply and demand. But its indirect effects extend beyond the labour market. They are analysed here with a macro model that distinguishes three types of work and ten industries, whose firms differ in their price structures and the degrees to which tax and social-insurance payments are avoided. Raising the minimum wage generates tension on the labour market and reduces employment of the unskilled. Since the price level rises faster than average pay and aggregate employment falls, so does real consumption. The firms' profits and investment decline, but the former can be offset even by a small increase in tax avoidance. Although the rise in the minimum wage boosts tax revenues, budgetary expenditures rise more and the balance deteriorates. Advocates of a higher minimum wage need to consider these consequences if they are to reach a responsible decision.

Keywords

EN

LABOR MARKET; MINIMUM WAGE; SUPPLY AND DEMAND; TAX

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Committee for Economic Sciences of the Hungarian Academy of Sciences
• Journal: Kozgazdasagi Szemle (Economic Review)
• Year: 2004
• Volume: 51
• Issue: 4
• Pages: 325-345
• Document type: ARTICLE

Contributors

author

Halpern L.

author

Koren M.

author

Korosi G.

author

Vincze J.

• L. Halpern, no address given, contact the journal editor

Identifiers

CEJSH db identifier

06HUAAAA00651644