This article is concerned with the law evasion (reduced wages) and law avoidance
(modified employment) aspects of noncompliance behavior by risk-averse firms
under the minimum wage law. It demonstrates that the adverse disemployment
effects of a legal minimum wage under the conventional "full compliance" assumption should be modified by an "employment effect" of noncompliance, although it
is shown that risk-averse violating firms would employ less labor than they would
if they were risk-neutral. Findings suggest that the most effective strategy for
motivating risk-averse firms to comply with minimum wage laws is imposing stiffer
penalty fees.
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