Compliance with the Minimum Wage Law

This paper investigates the extent and patterns of compliance with the federal minimum wage. Using a profit-maximizing model of compliance, predictions about compliance with weak or random government enforcement are made. Such enforcement is not random, however, and our measures of compliance suggest that government enforcement, while not inducing anything near complete compliance, does have an impact. Overall compliance in 1973 is estimated to be about 65 percent, while it is about 10 percentage points lower after the new minimum was established in 1975. Compliance appears highest among regional/racial/sex (but not age) groups where market incentives for violation are strongest.