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Promoting labour market efficiency and fairness through a legal minimum wage : the Webbs and the social cost of labour

Kaufman, Bruce E. (2009) Promoting labour market efficiency and fairness through a legal minimum wage : the Webbs and the social cost of labour. British Journal of Industrial Relations, 47 (2). pp. 306-326. ISSN 0007-1080

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Abstract

Neoclassical economists, using a competitive demand/supply model of labour markets, typically conclude a legislated minimum wage is harmful to economic efficiency and social welfare. The major theoretical counter‐attack by proponents of a minimum wage is to argue that low‐wage labour markets are better modelled as monopsonistic. This article develops and formalizes a second theoretical defence for a legal minimum wage law. This defence rests on the concept of the social cost of labour, as originally popularized by Sidney and Beatrice Webb and then further developed by American institutional economists. This analysis is unique in that it continues to use the competitive demand/supply model but nonetheless demonstrates that a legislated minimum wage often simultaneously increases economic efficiency and fairness, unlike the neoclassical prediction.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Date Deposited: 12 Nov 2015 19:04
Last Modified: 12 Nov 2015 19:04
URI: http://webbs.library.lse.ac.uk/id/eprint/801

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