ABSTRACT
The so-called “law of the minimum wage” is an excellent starting point, not only because it has been at the center of the recent (French) debate on low wages, but also because it is one of the very few proposals that can legitimately claim to be an “economic law.” According to a survey, 90 percent of economists believe in it. After all, isn’t it enough to remark that when the price of a given good rises, its demand diminishes? One could not find a more elementary economic truth. Unfortunately, David Card and Alan Krueger have observed through various North American experiences of increasing the minimum wage that the employment level of the least qualified either remained the same or increased. They did not manage to find the negative effect predicted by the “law.” Besides, those who have a bit of memory know that as early as the late 1970s, Malinvaud had proposed a macroeconomic configuration, which he baptized “Keynesian unemployment,” in which “when wages rise, so does employment.” How is this possible? The reason is that the economy is a complex web of interdependencies that does not allow us to predict the final outcome of a change in a single variable. A rise in interest rates may well lead to an appreciation of the national currency, but the contrary is just as possible. There are no universal laws in economics. Instead there is only a set of highly various mechanisms, such that when analyzing a given situation it is necessary that we take into account economic conditions, institutions and specific histories. “Well, even so,” one could say, “don’t we simply have to be more precise about the initial conditions in order to predict the final outcome?”
