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Labour supply responses to an increase in minimum wages: an overview of the literature

Wages Labour force Australia

The paper provides an overview of economic theory on labour supply and discusses factors that can affect the labour supply decision including financial and non-financial benefits or disincentives, individual or household characteristics and labour demand.

This review found relatively few research papers on the labour supply responses to increases in minimum and otherwise low wages, both in Australia and internationally. Findings from empirical studies reviewed were ambiguous and varied in their methodology. Some population subgroups have been found to be more responsive to wage changes, such as females (particularly partnered females), and these subgroups are also more likely to be award-reliant and therefore more likely to respond to minimum wage changes. More research is needed to better understand the supply side effects of an increase in minimum wages.

Authors: David Rozenbes, Rebecca Kenny, Lucy Nelms and Samantha Farmakis-Gamboni

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