Minimum wage legislation, productivity and employment

The effects of minimum wage legislation are analysed with the assumptions that firms are able to alter the working conditions of their employees, and that workers have different preferences about the characteristics of their job. The main findings tally with Card and Krueger's (1995) recent somewhat puzzling empirical evidence about the effects of changes in minimum wage. I find that the effects of changes in the minimum wage on employment are limited, that there is a positive spillover on high-wage workers, and that there is bunching of workers at the minimum wage.