Articles by Friedrich Kreuser

Technology and minimum wages are likely to change the mix of capital and labour in industry

Friedrich Kreuser, Department of Economics, Stellenbosch University
reads 5,839

While technology is making capital cheaper, policies like the national minimum wage will make labour more expensive. What does this mean for the choices firms make in terms of labour and capital inputs? This research shows that higher prices for labour will result in lower demand for labour, making job creation more difficult. Low-skilled and high-skilled labour are substitutes – higher wages for low-skilled workers will encourage firms to employ more high-skilled workers and become more skill intensive.