Advertisement

Is the Minimum Wage Ethically Justifiable? An Order-Ethical Answer

  • Nikil Mukerji
  • Christoph Schumacher
Chapter

Abstract

Is the minimum wage ethically justifiable? In this chapter, we attempt to answer this question from an order-ethical perspective. To this end, we develop two simple game theoretical models for different types of labour markets and derive policy implications from an order-ethical viewpoint. Our investigation yields a twofold conclusion. Firstly, order ethicists should prefer a tax-funded wage subsidy over minimum wages if they assume that labour markets are perfectly competitive. Secondly, order ethics suggests that the minimum wage can be ethically justified if employers have monopsony power in the wage setting process. As it turns out, then, order ethics neither favours nor disfavours the minimum wage. Rather, it implies conditions under which this form of labour market regulation is justified and, hence, allows empirical science to play a great role in answering the ethical questions that arise in the context of the minimum wage debate. This illustrates one of order ethics’ strengths, viz. the fact that it tends to de-ideologize the debate about ethical issues.

Keywords

Minimum wage Wage regulation policies Ethics Efficiency 

References

  1. Bell, L.A. 1997. The impact of minimum wages in Mexicao and Colombia. Journal of Labour Economics 15(3): 102–135.CrossRefGoogle Scholar
  2. Brown, C., C. Gilroy, and A. Kohen. 1982. The effects of the minimum wage on employment and unemployment. Journal of Economic Literature 20(2): 487–528.Google Scholar
  3. Brown, C. 1988. Minimum Wage Laws: Are They Overrated?, Journal of Economic Perspectives 2(3): 133–145.Google Scholar
  4. Bruno, C., and S. Cazes. 1997. La chômage des jeunes en France: Un état des lieux. Revue de l’OFCE 62: 75–107.Google Scholar
  5. Burdett, K., and D.T. Mortensen. 1998. Wage differentials, employer size, and unemployment. International Economic Review 39(2): 257–273.CrossRefGoogle Scholar
  6. Card, D. 1992a. Using regional variation in wages to measure the effects of the federal minimum wage. Industrial and Labor Relations Review 46: 22–37.CrossRefGoogle Scholar
  7. Card, D. 1992b. Do minimum wages reduce employment? A case study of California, 1987–1989. Industrial and Labor Relations Review 46: 38–54.CrossRefGoogle Scholar
  8. Card, D., and A.B. Krueger. 1994. Minimum wages and employment: A case study of the fast-food industry in New Jersey and Pennsylvania. American Economic Review 84(4): 772–793.Google Scholar
  9. Card, D., and A.B. Krueger. 1995. Myth and measurement. Princeton University Press: Princeton.Google Scholar
  10. Card, D., and A.B. Krueger. 2000. Minimum wages and employment: A case study of the fast-food industry in New Jersey and Pennsylvania: Reply. American Economic Review 90(5): 1397–1420.CrossRefGoogle Scholar
  11. Cordero, R.A. 2000. Morality and the minimum wage. Journal of Social Philosophy 31(2): 207–222.CrossRefGoogle Scholar
  12. Deere, D., K.M. Murphy, and F. Welch. 1995. Employment and the 1990–1991 minimum wage hike. American Economic Review 85(2): 232–237.Google Scholar
  13. Feliciano, Z.M. 1998. Does the minimum wage affect employment in Mexico? Eastern Economic Journal 24(2): 165–180.Google Scholar
  14. Gaski, J.F. 2004. Raising the minimum wage is unethical and immoral. Business and Society Review 109(2): 209–224.CrossRefGoogle Scholar
  15. Gramlich, E. 1976. The impact of minimum wages on other wages, employment, and family incomes. Brookings Papers on Economic Activity 2: 409–451.CrossRefGoogle Scholar
  16. Hicks, J.R. 1939. The foundations of welfare economics. The Economic Journal 49(196): 696–712.CrossRefGoogle Scholar
  17. Hardin, G. 1968. The Tragedy of the Commons. Science 162: 1243–1244.Google Scholar
  18. Kaldor, N. 1939. Welfare propositions of economics and interpersonal comparisons of utility. The Economic Journal 49(195): 549–552.CrossRefGoogle Scholar
  19. Katz, L.F., and A.B. Krueger. 1992. The effect of the minimum wage on the fast food industry. Industrial and Labor Relations Review 46(1): 6–21.CrossRefGoogle Scholar
  20. Kim, T., and L. Taylor. 1995. The employment effect in retail trade of California’s 1988 minimum wage increase. Journal of Business and Economic Statistics 13(2): 175–182.Google Scholar
  21. Manning, A. 2003. Monopsony and the efficiency of labour market interventions. Labour Economics 11: 145–163.CrossRefGoogle Scholar
  22. Manning, A. 2004. Monopsony in motion: Imperfect competition in labour markets. Princeton University Press: Princeton.Google Scholar
  23. Mincer, J. 1976. Unemployment effects of minimum wages. Journal of Political Economy 84: 87–105.CrossRefGoogle Scholar
  24. Moore, T.G. 1971. The effects of minimum wages on teenage unemployment rates. The Journal of Political Economy 79(4): 897–902.CrossRefGoogle Scholar
  25. Mortensen, D.T. 1988. Equilibrium wage distribution: A synthesis. Center for Mathematical Studies in Economics and Management Science, Discussion Paper 811, Northwestern University.Google Scholar
  26. Mukerji, N., and C. Schumacher. 2008. How to have your cake and eat it too: Resolving the efficiency-equity trade-off in minimum wage legislation. The Journal of Interdisciplinary Economics 19(4): 315–340.Google Scholar
  27. Neumark, D., and W. Wascher. 1992. Employment effects of minimum and subminimum wages: Panel data in state minimum wage laws. Industrial and Labor Relations Review 46: 55–81.CrossRefGoogle Scholar
  28. Neumark, D., and W. Wascher. 1995. The effect of New Jersey’s minimum wage increase on fast-food employment: A re-evaluation using payroll records. Mimeograph: Department of Economics, Michigan State University.CrossRefGoogle Scholar
  29. Neumark, D., and W. Wascher. 2000. Minimum wages and employment: A case study of the fast-food industry in New Jersey and Pennsylvania: Comment. American Economic Review 90(5): 1362–1396.CrossRefGoogle Scholar
  30. Okun, A. 1975. Equality and efficiency—The big tradeoff. Washington, D.C.: The Brookings Institution.Google Scholar
  31. Saget, C. 2001. Poverty reduction and decent work in developing countries: Do minimum wages help? International Labour Review 140(3): 237–269.CrossRefGoogle Scholar
  32. Stigler, G.J. 1946. The economics of minimum wage legislation. American Economic Review 36(3): 358–365.Google Scholar
  33. Welch, F. 1974. Minimum wage legislation in the United States. Economic Inquiry 12(3): 285–318.CrossRefGoogle Scholar
  34. Wessels, W.J. 1980. Minimum wages, fringe benefits and working conditions. Washington, D.C.: American Enterprise Institute.Google Scholar
  35. Wilkinson, T.M. 2004. The ethics and economics of the minimum wage. Economics and Philosophy 20(2): 351–374.CrossRefGoogle Scholar

Copyright information

© Springer International Publishing Switzerland 2016

Authors and Affiliations

  1. 1.Faculty of Philosophy, Philosophy of Science, and the Study of ReligionLudwig-Maximilians-Universität MünchenMunichGermany
  2. 2.School of Economics and FinanceMassey UniversityAucklandNew Zealand

Personalised recommendations