With the Biden-Harris executive order raising the minimum wage to $15 for federal contractors1, the debate has resurfaced in 2021. The minimum wage law is becoming a popular tool to address inequality and poverty. From 2010 onwards, diverse countries like Germany, Qatar, Suriname, and Korea2 have adopted minimum wage systems. In 2019, India extended coverage through a national universal minimum wage3 , and the federal minimum wage floor was increased in South Africa4 . An estimated 19 percent of all wage earners are paid at or below the applicable minimum wage5 . Neoclassical economists argue that if the markets are perfectly competitive, any binding wage floor above the market clearing wage will unambiguously result in employment reduction6 . However, empirical work suggests “a rather muted effect of minimum wages to date on employment”7 . Moreover, the measurable positive impact of minimum wage on societal welfare and populist appeal leads governments to implement it more commonly. This essay will argue that currently, we should not abolish the minimum wage.
The arguments on minimum wage raised over the last three decades have oscillated between for and against, but Card and Krueger’s (1994) seminal study8 changed the tide in favor. The Organisation for Economic Co-operation and Development (OECD) published a Jobs Study report in 1994 recommending that countries “reassess the role of statutory minimum wages as an instrument to achieve redistributive goals and switch to more direct instruments9 .” But after Card and Krueger’s work stimulated further research, the OECD stated in 2018 that “minimum wages can help ensure that work is rewarding for everyone” and that “when minimum wages are moderate and well designed, adverse employment effects can be avoided”10 . Similarly, in a 1992 survey, 79% of the respondents from the American Economic Association agreed that a minimum wage could lead to unemployment among young and low-skilled workers, but that number reduced to 46% in 2000
1 House, The White. “FACT SHEET: Biden-Harris Administration Issues an Executive Order to Raise the Minimum Wage to $15 for Federal Contractors.” The White House, 26 Apr. 2021, www.whitehouse.gov
2The Economist. “South Korea Tries to Boost the Economy by Hiking the Minimum Wage.” The Economist, 12 Oct. 2017, www.economist.com
3 “Minimum Wages | Chief Labour Commissioner.” Govt., clc.gov.in/clc/min-wages.
4South African Government News, et al. “National Minimum Wage Increased to R21.69 per Hour.” SAnews, 10 Feb. 2021,
5 “Global Wage Report 2020–21: Wages and Minimum Wages in the Time of COVID-19.” ILO, 2 Dec. 2020,
6 Stigler, George. “THE ECONOMICS OF MINIMUM WAGE LEGISLATION.” The American Economic Review, 1946,
7 HM Treasury, and Arindrajit Dube. “Impacts of Minimum Wages: Review of the International Evidence.” GOV.UK, 5 Nov. 2019,
8 Card, David. “Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania.” NBER, 1 Oct. 1993, www.nber.org/papers/w4509.
9 OECD. www.oecd.org/els/emp/1941679.pdf.
10 “Good Jobs for All in a Changing World of Work: The OECD Jobs Strategy | En | OECD.” OECD, www.oecd.org.
11 “What Harm Do Minimum Wages Do?” The Economist, 8 Feb. 2021.
12 Manning, Alan. “The Elusive Employment Effect of the Minimum Wage.” American Economic Association,
