We explore the far-reaching implications of low-wage subsidies on skill formation, aggregate employment and welfare. Low-wage subsidies have three important effects. First, they promote employment of low-skilled workers (who tend to be the ones who earn low wages). Second, by raising the payoff...

We exploit a natural experiment provided by the 1990 introduction of the UK National Minimum Wage (NMW) to investigate the relationship between wages and monitoring and to test for Efficiency Wages considerations in a low-wage sector, the UK residential care homes industry. Our findings seem to...

A century has passed since the first call for a British national minimum wage (NMW). That remarkable Fabian tract discussed wage setting, coverage, monopsony, international labour standards, inspection and compliance and the interaction between the NMW and the social security system. The NMW was...

Wage subsidies and public transfers for the unemployed as a means for increasing employment have been intensively discussed in Germany. The paper explains which models have already been applied. In addition, it describes some recent reform proposals and analyzes what economic policy might be...

This paper studies the impact of NAFTA on informality and real wages in Mexico. Using a dynamic industry model with firm heterogeneity, it is predicted that import tariff elimination could reduce the incidence of informality by making more profitable to some firms to enter the formal sector,...

Over the last two decades, earnings in the United States increased at the top and at the bottom of the wage distribution but not in the middle - the intensely debated middle class squeeze. At the same time there was a substantial decline of employment in middle-skill production and clerical...

The secular shift in labor demand from unskilled to skilled labor is explained within a model that is solved numerically. There are three branches producing a basic good, a differentiated luxury good, and an intermediate service. Production is more skill-intensive in the luxury good and the...