Optimal Minimum Wage in the Classic Labor Supply-and-Demand Paradigm

Rajeev Dehejia, Bjørn N. Jørgensen, Raphael C. Thomadsen*

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review


This article demonstrates that minimum wage laws need not induce unemployment even under the classic labor supply-and-demand paradigm. As a result, minimum wage laws can be welfare-enhancing under the basic labor supply and demand model, suggesting the presence of an optimal minimum wage. We discuss conditions under which the optimal minimum wage level is the subsistence wage level. As a consequence, minimum wages should vary across states or countries with the local subsistence levels
Original languageEnglish
JournalJournal of Poverty
Issue number4
Pages (from-to)481-495
Number of pages15
Publication statusPublished - 2008
Externally publishedYes


  • Minimum wage
  • Unemployment
  • Wage regulation

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