Theory on the Impact on Employment
             The traditional economic theory of supply and demand predicts that an increase in the minimum wage above the market rate would increase the cost faced by employers, causing them to reduce employment. Recent theoretical analyses, however, have challenged this conventional wisdom, examining reasons why some employers may respond to a moderately higher minimum wage by expanding employment. At least five recently published papers have studied this logic. These papers show that a moderate minimum wage can have a positive effect on employment. In general, then, an increase in the minimum wage has an ambiguous effect on employment.
             In 1996, President Clinton signed legislation raising the minimum wage by 90 cents from $4.25 to $5.15 an hour. Since the 1996-1997 increase in the minimum wage, the American economy-and labor markets in particular-have continued to perform very strongly. Between September 199
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