Hitting two birds with one stone: A tale on the (not so) secret miracle of minimum wages

Friedrich Leopold Sell, Michael Öllinger

Abstract


In this note, we recall that unions traditionally pursue a policy of pushing higher average wages and, at the same time, for a compression of the structure of wages and salaries, which is some sort of equity. Given the precipitous fall of union density in many, if not all, OECD countries, the actual good climate for minimum wage policy comes at no surprise. Despite the fact that unions do dislike the intervention of labor market policy to the detriment of tariff autonomy, we can show that minimum wages are capable of serving both of the above-mentioned goals of unions and also help increase the overall wage quota in the economy.  Hence, it can be concluded that the unions have a double dividend when inviting policy makers to pursue a policy of minimum wages: both the average wage rate can be increased and the dispersion of wages be lowered, ceteris paribus. 


Keywords


Average and minimum wages; Strategy of unions; Wage dispersion; Wage quota.

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DOI: http://dx.doi.org/10.18533/jefs.v5i3.289

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