AGGREGATE EMPLOYMENT Although no precise estimate of the effects of a minimum wage upon aggregate employment is possible, we may nevertheless form some notion of the direction of these effects. The higher the minimum wage, the greater will be the number of covered workers who are discharged. The current proposals would probably affect a twentieth to a tenth of all covered workers, so possibly several hundred thousand workers would be discharged. Whatever the number (which no one knows), the direct unemployment is substantial and certain; and it fairly establishes the presumption that the net effects of the minimum wage on aggregate employment are adverse.
This presumption is strengthened by the existing state of aggregate money demand. There is no prospective inadequacy of money demand in the next year or two—indeed, the danger is that it is excessive. If the minimum wage were to increase the relative share of wage-earners and, hence, the propensity to consume—which requires the uncertain assumption that the demand for inefficient labor is inelastic—the increment of consumer demand will be unnecessary, and perhaps unwelcome. (Conversely, the direct unemployment resulting from the wage law would diminish faster in a period of high employment.) It is sufficient for the present argument that no large increase in employment will be induced by the legislation. Actually, there is a presumption that a minimum wage will have adverse effects upon aggregate employment.