Minimum Wages and Employment: Comment

Does increasing the minimum wage lead to employment losses? For many years most economists thought that the answer to this was a straightforward ‘yes’. However, research during the 1990s began to overturn this conventional wisdom and showed that increases in the minimum wage did not automatically lead to employment losses. A recent Australian study, by Leigh (2003), examined the impact of statutory minimum wages in Western Australia and reached conclusions which supported the conventional view. However, close scrutiny of Leigh's article shows that it is fundamentally flawed. Despite Leigh's efforts, it remains the case that we simply do not know a great deal about the employment impact of Australia's system of minimum wages.     

The Law and Economics of Costly Contracting

In most of the contract theory literature, contracting costsare assumed either to be high enough to preclude certain formsof contracting or low enough to permit any contract to be written.Similarly researchers usually treat renegotiation as eithercostless or prohibitively costly. This article addresses themiddle ground between these extremes, in which the costs ofcontracting and renegotiation can take intermediate values andthe contracting parties can themselves influence these costs.The context for our analysis is the canonical problem of inducingefficient relation-specific investment and efficient ex posttrade. Among our principle results are: (i) The efficiency andcomplexity of the initial contract are decreasing in the costto create a contract. Hence the best mechanism design contractscan be too costly to write. (ii) When parties use the simplercontract forms, they require renegotiation to capture ex postsurplus and to create efficient investment incentives. In somecases, parties want low renegotiation costs. More interestingis that, in other cases, parties have a strict preference formoderate renegotiation costs. (iii) The effect of contract lawon contract form is significant but has been overlooked. Inparticular, the law's interpretive rules raise the cost of enforcingcomplex contracts, and thus induce parties to use simple contracts.Worse, the law also lowers renegotiation costs, which furtherundermines complex contracts and is also inappropriate for someof the simpler contracts.     

Entrepreneurship in action: bringing together the individual,organizational and institutional dimensions of entrepreneurial action

There is increasing recognition that entrepreneurship research needs to achieve a better balance between studying to entrepreneurial activities and setting these activities in their wider context. It is important that these good intentions are realized and one way of doing this is to bring together ethnographic research with concepts from sociology and from pragmatist thinking. In this study, field research material is interwoven with a set of key concepts to ensure that balanced attention is paid to issues at the levels of the enterprising individual, the organization and societal institutions. The field research is innovative in combining depth study of several enterprises and their founders with the analysis of broader aspects of ‘entrepreneurship in society’. It achieves this through a process of ‘everyday ethnographic’ observation, reading, conversation and ongoing analysis. In the spirit of a pragmatist conception of social science, the underlying logic of entrepreneurial action is identified. This is a logic which needs to be appreciated by all of those who wish to understand and/or engage with the entrepreneurial dimension of contemporary social and economic life.     

Management “flavours of the month”: their role in managers' lives

Existing analyses and critiques of the succession of management fads and fashions entering managerial discourse and activities are complemented and developed by drawing on participant observation research carried out in an organization utilizing a variety of “packaged innovations”. It is shown that what are sometimes mocked as “flavours of the month” (FOMs) play a role in the double-controlproblem faced by all managers: the problem of managing their personal identities, careers and understandings at the same time as contributing to the overall control of the organization in which they are managers. Managers in the organization studied are shown generally to be critical of the “flavour of the month effect” but there is nevertheless an equivocality about how such ideas and practices can function.     

Debreu-like properties of utility representations

Traditionally the codomain of a utility function is the set of real numbers. This choice has the advantage of ensuring the existence of a continuous representation but does not allow to represent many preference structures that are relevant to utility theory. Recently, some authors have started a systematic study of utility representations that are not real-valued, introducing the notion of a Debreu chain. We continue their analysis defining two Debreu-like properties, which are connected to a local continuity of a utility representation. The classes of locally Debreu and pointwise Debreu chains here introduced enlarge the class of Debreu chains. We give several examples and analyze some properties of these two classes of chains, with particular attention to lexicographic products.     

UK wage underpayment: implications for the minimum wage

Dynamic monopsony suggests that, due to labour market frictions, workers will be paid below their productivity. This paper uses the stochastic frontier technique to estimate the degree of this underpayment for UK employees. It finds evidence of significant underpayment. The estimates are used to examine whether the predictions of dynamic monopsony are empirically accurate. No conclusive evidence against this theoretical framework is found. The paper also investigates whether payment according to productivity is a sufficient condition for the elimination of the ‘working poor’ problem. Due to the existence of an unemployment barrier, it finds that the minimum wage is not an effective anti-poverty policy.     

Full wages,part-time employment and the minimum wage

The economic effects of the minimum wage have become increasingly ambiguous. Historically, economists have asserted that increases in the minimum wage result in increases in unemployment. This relationship has been challenged recently by Card and Krueger, Katz and Krueger, and Card. These authors have provided empirical evidence that seems to indicate that there is no relationship between various economic variables (such as level of employment, and product price, among others) and the minimum wage. In addition, these authors have not provided a cogent presentation of the effects of the minimum wage on part-time employment. This study examines, from a theoretical standpoint, the effects of the minimum wage on employment. Furthermore, we emphasize the distinction between money wages and full wages; and the role that part-time employmentplays in the analysis. After incorporating these factors into a theoretical presentation, we provide empirical evidence by way of an OLS regression. We conclude that firms respond to increases in the minimum wage by altering the level of part-time employment. By doing this, firms are able to absorb the minimum wage increase because part timers receive fewer fringe benefits.