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<p>The economic textbooks may be wrong. Do minimum wage laws raise unemployment? If so, then why is there now a raging debate within the economic literature about the effects of minimum wage laws on unemployment rates, with a number of empirical papers in top journals, most notably the Card & Krueger’s 1994 piece in AER, showing that such laws may actually decrease unemployment. Yes, that’s right - a decrease. </p>
<p>Granted, other empirical studies have shown that there may indeed be an increase in unemployment. Nevertheless, what is now clear is that no consensus exists amongst the economics community, and that economics textbooks should no longer be asserting a clear effect of minimum wage laws on unemployment. </p>
<p>To be fair, a consensus amongst economists regarding this issue did exist a few decades ago, which is surely where economics textbooks have based their claim. But those textbooks are now obsolete as empirical tools and the availability of data have advanced considerably over the last generation. </p>
<p>Whatever one’s opinion about the issue, surely nobody can continue to argue with a straight face that a consensus exists within the economics community. A considerable fraction of leading economists now believe that there is no clear relationship between minimum wage laws and rising unemployment.</p>