Theoretical evolution and empirical integration of minimum wage employment effect -- Based on the literature review of OECD countries

Abstract

The minimum wage system is an important tool for the government to adjust labor remuneration and ensure the income of low-income workers, but its impact on the employment level and wage level has long been controversial in the academic community. Whether the minimum wage system can ensure the stable income of low-income groups and avoid reducing the employment rate has always been the core of labor economics. The competitive labor market theory and the buyer monopoly theory put forward completely opposite predictions, and the cross-border empirical research based on OECD countries has not been consistent. This paper systematically collates the evolution of empirical evidence and theory in the past 40 years, focusing on the latest progress of transnational research panel data. Literature shows that: The relationship between minimum wage and unemployment rate is not simple linear; on the contrary, the nonlinear threshold effect and institutional heterogeneity have been supported by multiple evidences. Although the overall unemployment rate remains controversial, the vulnerability of youth and low-skilled groups has formed a broad consensus. Paragraph offer a comparison that, although the overall unemployment rate remains controversial, the vulnerability of youth and low skilled groups has formed a broad consensus. This paper further evaluates the limitations of the existing research, and puts forward the future research direction from the perspectives of identification strategy improvement, downward scenario investigation and applicability in developing countries. This article set a solid foundation for future research in this field.