The ambiguous effect of minimum wages on hours

In a competitive model we ease the assumption that efficiency units of labour are the product of hours and workers. We show that a minimum wage may either increase or decrease hours per worker and the change will have the opposite sign to the slope of the equilibrium hours hourly wage locus. Similarly, total hours worked may rise or fall. We illustrate the results throughout with a Cobb–Douglas example.

Research Highlights►Impact of minimum wage on number of workers and hours per worker modelled. ►A minimum wage may increase or decrease hours per worker. ►A minimum wage may increase or decrease total hours worked.