For decades governments have been enforcing minimum wage laws, prohibiting employers from paying wages below a mandated level. The policymakers introducing minimum wage laws claim such laws are conducive to the betterment of especially low-skilled and entry level workers, minorities, youth and the unemployed.
This policy analysis reviews economic models used to study the impact of minimum wage laws and examines the impact of a minimum wage on six Eastern members of the European Union (Czech Republic, Hungary, Lithuania, Poland, Slovakia and Slovenia).
The results show that rather than curing poverty and income inequality, the minimum wage is creating it, because when set above the productivity level, the minimum wage ends up harming people by suppressing job opportunities. Therefore, policymakers should stop pursuing policies such as minimum wage and focus on policies that generate economic growth.
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