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Prepared by Timothy Lane.
Note that the lowest of these numbers still implies a minimum wage above the current level in the United States of US$4.75, despite the much higher levels of earnings in the United States.
Income distribution issues and their relationship to labor market policies were addressed in Chapter VI of last year’s background paper (SM/96/254, 10/9/96).
In addition to the effect on employment effects, the minimum wage may also impair the efficiency of labor allocation, as workers displaced by the minimum wage are re-hired in other jobs where they are less productive.
Another study by Bell and Wright (1996), however, found that the Wage Boards had no significant influence on wages for any category of workers, a result the authors attribute to poor enforcement. This finding tends to limit the relevance of the small employment effects reported elsewhere in the literature.
By the same token, however, hiring costs faced by the firm (including the acquisition of job-specific skills) would also give the individual worker some monopoly power.
Unfortunately, there is little evidence on how much their incomes would be affected.
See Kingdom of the Netherlands-Netherlands: Selected Issues (SM/97/139, 6/4/97).