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In the article The Minimum Wage and Product Differentials Brodley S Wimmer discusses the effects of a minimum wage increase on employment level productivityon different industries Considering the effect of a minimum wage increase on employment level Wimmer first noted that the real value of the minimum wage between 1966 and 1997 has decreased by 17 The real value of the minimum wage represents the nominal minimum wage adjusted to the level of inflation Therefore according to Wimmer since the value of the minimum is less than what it should be in real term small minimum wage increase would significantly reflect the level of employment However while the real value of the minimum wage declined for that period large increase in the desperation of wages occurred at the same time As a consequence the moderate effect of the real value of the minimum on employment was offset by the overall increase in wages On the other hand how minimum wage increase affects employment depends on many factors First depending on how intensively the industry affected by an increase of minimum wage uses labor the effect on employment will vary substantially According to Wimmer in labor-intensive sectors such as hotel retail-trade industry and so on the inability of such industries to adjust their production processes from labor to capital make them more vulnerable to a minimum wage increase For those types of sectors an increase in the minimum wage is passed on to the customers by charging them higher prices or its absorbed by the firms that make the firms less productive where there is a decline in the scale effect The effect of minimum wage increase does not decrease employment To maintain their productivity firms substitute the low skilled labor with high-skilled labor However in capital-intensive sectors the effect of a minimum wage increase is different because the firms have the possibility to substitute away from labor and use more capital and the firm will
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