The standard economic principles conclude minimum wage policies will reduce employment amongst low-skilled workers. However, well-executed research by David Card and Alan Krueger contradicts this common-sense view. Does that mean we should abandon the textbook understanding of minimum wage laws? Not quite.

Admirable though it is, it is still only one study, and plenty of other research casts a shady on their conclusion:

Firstly, much has been made of the robust finding that low-skilled immigration has an appreciable impact on native wages. This demonstrates a highly elastic demand curve for low-skilled labour.

Secondly, European labour market regulations are a leading cause of high long-term unemployment. It is unlikely that minimum wage laws are the exception to the rule that regulations uniformly negatively impact employment.

Thirdly, price controls in housing, agriculture, energy, and banking demonstrably have detrimental effects. If we can’t generalise these effects across markets, we can’t do it across countries, eras, or demographics. That’s a lot of literature to ignore.

Lastly, a core Keynesian theory states downward nominal wage rigidity often creates involuntary unemployment. If governments literally prevent wages from dropping to increase demand and match supply, the results should be unsurprising.

Why do minimum wage laws persist? Because they look good.