Using post-regularization distribution regression to measure the effects of a minimum wage on hourly wages, hours worked, and monthly earnings

Panel data are often used in empirical work to account for additive fixed time and unit effects. More recently, the synthetic control estimator relaxes the assumption of additive fixed effects for case studies, using pre-treatment outcomes to create a weighted average of other units which best approximate the treated unit. The synthetic control estimator is currently limited to case studies in which the treatment variable can be represented by a single indicator variable. Applying this estimator more generally, such as applications with multiple treatment variables or a continuous treatment variable, is problematic. This paper generalizes the case study synthetic control estimator to permit estimation of the effect of multiple treatment variables, which can be discrete or continuous. The estimator jointly estimates the impact of the treatment variables and creates a synthetic control for each unit. Additive fixed effect models are a special case of this estimator. Because the number of units in panel data and synthetic control applications is often small, I discuss an inference procedure for fixed N. The estimation technique generates correlations across clusters so the inference procedure will also account for this dependence. Simulations show that the estimator works well even when additive fixed effect models do not. I estimate the impact of the minimum wage on the employment rate of teenagers. I estimate an elasticity of -0.44, substantially larger than estimates generated using additive fixed effect models, and reject the null hypothesis that there is no effect.

Generalizes the case study synthetic control estimator to permit estimation of the effect of multiple treatment variables, which can be discrete or continuous, then estimates the impact of the minimum wage on the employment rate of teenagers.

We re-examine the evidence presented by Neumark and Wascher (1992) on the employment effect of the minimum wage. We find three critical flaws in their analysis. First, the school enrollment variable that plays a pivotal role in their specifications is derived on the false assumption that teenagers either work or attend school. Measurement error biases contaminate all the empirical estimates that use this enrollment variable. Second, Neumark and Wascher measure the effect of the minimum wage by a coverage-weighted relative minimum wage index. This variable is negatively correlated with average teenage wages. Taken literally, their results show that a rise in the coverage-weighted relative minimum wage lowers teenage wages. Examining the direct effects of state-specific minimum wages, we find that increases in state minimum wages raise average teenage wages but have essentially no employment effects. Finally, a careful analysis of Neumark and Wascher's data shows that subminimum wage provisions are rarely used. This casts doubt on their claim that subminimum provisions blunt any disemployment effect of the minimum wage. Neumark and Wascher contend that other minimum wage studies are biased by failing to control for school enrollment, and by failing to consider the lagged effects of minimum wages. We re-analyze the experiences of individual states following the April 1990 increase in the Federal minimum wage, allowing for a full year lag in the effect of the law and controlling for changes in (properly measured) enrollment rates. Contrary to their claims, allowing for lagged effects and controlling for enrollment status actually strengthens the conclusion that the 1990 increase in the Federal minimum had no adverse employment effect.

Research background: The government of the Czech Republic has agreed to an increase in the minimum monthly wage as of the beginning of 2017 to 11,000 CZK, which represents a year-over-year increase of over 11 %. The government is thus fulfilling its objective set out in February 2014 and stipulated in the Government Statement of Purpose, i.e. to approximate the minimum wage to 40 % of average wages.Purpose of the article: The purpose of the article is to assess the adequacy of the Government Minimum Wage Valorization Policy, in particular from two points of view. Firstly, in view of selected macroeconomic indicators in the Czech Republic ? the development of consumer prices, average gross wages, economic growth and workforce productivity. Secondly, in comparison with other EU member states which have introduced the institution of a minimum wage.Methods: In order to assess the adequacy of government policy to improve the social protection of the rights of the working population, a background research was conducted into the literature of important studies on the effects of minimum wages on unemployment, while the development of average gross wages in the CR, the minimum monthly wages in the CR and the Kaitz index were also analyzed. Furthermore, an evaluation of selected macroeconomic indicators in the Czech Republic was performed by means of time lines and the percentage representation of employees in the individual gross wage bands according to sex and type of economic activity. Last, but not least, a comparison was made of minimum wages, real gross domestic product per capita and workforce productivity in Euros and in purchasing power standards between the Czech Republic and countries which have enacted the institution of minimum wages.Findings and Value added: The minimum wage in the Czech Republic is the fifth lowest in the EU. In the long term, it is earned by approximately 3% of employees, which is less than the rate common in other EU countries. Currently, the amount of the minimum wage is below the threshold of income poverty. In comparison with the GDP per capita in PPS and real labour productivity per person employed in other EU countries, the position of the Czech Republic is significantly better, although other EU countries offer higher minimum wages. The decision of the current government to significantly increase the minimum wage as of 2017 is correct.

1. IntroductionThe effect of a legal minimum wage on employee turnover is an important consideration when evaluating the effectiveness of a minimum wage policy. If an increase in the minimum wage results in greater turnover, then firms' hiring costs are increased, and the direct benefit to workers who are paid the minimum wage may be lessened. A reduction in turnover, on the other hand, would mean more stability for employers and workers, though access to minimum wage jobs may be reduced for job seekers. Despite the recent proliferation of studies on the effects of legal minimum wages, their impact on turnover has received relatively little attention from economists. This may be due to the fact that much of the literature focuses on the teen labor where there is more churning than in the adult labor (Gardecki and Neumark 1998). The fact remains, however, that a significant proportion of workers hired at the minimum wage are adults, and the effects of the minimum wage onthe turnover hazard are understudied.1Standard economic theory suggests that a price floor such as a minimum wage results in fewer transactions and in rents for those suppliers who manage to sell. In the context of the labor market, this means workers in minimum wage jobs may be expected to receive rents and, therefore, may be less likely to quit. Another possible consequence of a minimum wage arises from imperfect information in the labor market combined with heterogeneity among workers and jobs. Prior to the start of an employment relationship, the worker does not know all the relevant aspects of the job and the employer does not know all the important characteristics of the worker. As a result, in the absence of a mandated minimum wage, job applicants may use wage offers to infer information about the nonpecuniary aspects of jobs, thereby facilitating the matching process. A binding minimum wage compresses the wage distribution so that a single wage is associated with a larger array of jobs. This means that the wage offer becomes a poor indicator of a job's nonwage characteristics, which leads to a higher proportion of poor matches and, consequently, more turnover.This paper uses data on young men and women in the 1988-1994 rounds of the National Longitudinal Survey of Youth (NLSY) to estimate the relationship between the minimum wage and the turnover hazard. The extent to which the minimum wage binds varies across states both because of differences in state laws and because of differences in wage levels across states. We exploit this variation to estimate turnover hazards as a function of the ratio of the nominal minimum wage to the state median wage. This variable measures the extent to which the minimum wage binds.We find some evidence that in states where the minimum wage is low relative to the state's median wage, men hired at the minimum wage have lower employee-initiated separation hazards than other low-wage workers. As the minimum wage rises relative to the prevailing median wage-that is, as the minimum wage becomes more binding-men hired at the minimum wage are increasingly likely to leave their jobs at any given duration. When the minimum wage is high relative to the median wage we find that men hired at the minimum wage have significantly higher employee-initiated separation hazards than other low-wage workers. We interpret these findings as evidence that while rents may accrue to minimum wage workers, the job matching process is undermined when the minimum wage binds. Our results apply to the men in our sample, but not to the women. Indeed, for women we find no connection between employment duration and the starting wage rate, though we do uncover some evidence that for women in low-wage jobs, employment duration is more elastic with respect to the presence of family-friendly fringe benefits than it is for men.The paper proceeds as follows. The next section explores the possible reasons minimum wages would affect turnover and discusses the existing empirical and theoretical research on this topic. …

The ‘perverse’ effects of wage and price controls in search markets

Using panel data on state minimum wage laws and economic conditions for the years 1973–89, the authors reevaluate existing evidence on the effects of a minimum wage on employment. Their estimates indicate that a 10% increase in the minimum wage causes a decline of 1–2% in employment among teenagers and a decline of 1.5–2% in employment for young adults, similar to the ranges suggested by earlier time-series studies. The authors also find evidence that youth subminimum wage provisions enacted by state legislatures moderate the disemployment effects of minimum wages on teenagers.

In their article published in the Minimum Wage Research Symposium in the October 1992 issue of this journal (Industrial and LaborRelations Review, Volume 45, Number 1, pp. 55-81), David Neumark and William Wascher claim to find empirical support for three propositions: (1) a higher minimum wage leads to a lower teenage employmentpopulation rate; (2) the effect of the minimum wage on employment can be seen within a year, but becomes stronger after two years; and (3) in states with legal subminimum wages, a significant fraction of teenage employees are paid a subminimum wage, and the availability of a subminimum wage blunts the disemployment effect of the minimum wage. The same symposium contains three papers by us that present empirical evidence suggesting conclusions opposite those of Neumark and Wascher.1 Since Neumark and

Assessing the main and spillover effects of Seattle's minimum wage on establishment decisions

This paper reexamines the issues of compliance with and enforcement of the minimum wage law recently addressed in this Journal by Ashenfelter and Smith and by Grenier. Pursuing a more rigorous methodology we are able to add new general conclusions, and correct and reconcile some previous conflicting conclusions concerning the role of the disparity between the minimum and free market wages, the level and elasticity of labor demand, and the magnitude of deterring monetary sanctions on the noncompliance decision. Our formulation also addresses the law evasion (reduced wages) as well as the law avoidance (modified employment) aspects of the noncompliance decision, which previous formulations have ignored.

Simple numerical measures of the minimum wage may offer deceptive indications of its impact. Alternative measures, such as kernel density or cumulative distribution plots, are more reliable, and highlight influences higher in the wage distribution or on the sector. Panel employment data from Colombia - where minimum wages seem high and binding - show that the minimum wage can have important impacts on wages and unemployment across the wage distribution. Maloney, Nunez, and colleagues provide an overview of minimum wage levels in Latin America and their true impact on the distribution of wages, using both numerical measures and kernel density plots for eight countries (Argentina, Bolivia, Brazil, Chile, Colombia, Honduras, Mexico, and Uruguay). They especially try to identify numeraire effects - where the minimum is used as a reference higher in the wage distribution - and effects - where it influences wage setting in the unregulated or informal sector. Their main findings: First, statutory minimum wages are often misleading, and graphical methods may be more reliable. Second, the minimum wage's effect on wage setting extends far beyond what is usually considered and probably beyond the effect in industrial countries. Using panel employment data from Colombia, where minimum wages seem high and binding, the authors quantify the minimum wage's effects on wages and on the probability of becoming unemployed. The Colombian case confirms the evidence offered by kernel density estimates: The minimum wage can have an important impact on wage distribution in the neighborhood of the minimum wage. The effects echo up the wage distribution in a clear demonstration of the numeraire effect. That this effect is stronger in Latin America than in the United States suggests that the minimum wage induces further-reaching rigidities in the labor market. The tradeoff between any possible effect on poverty and reduced flexibility is likely to be more severe in countries where this is the case. The effects on employment, and unemployment, are substantial. Informal salaried wages are also affected, confirming the graphical evidence of strong lighthouse effects. Self-employment earnings are not, however, confirming that the minimum wage is not simply serving as a measure of inflationary expectations. This paper - a product of the Poverty Sector Unit and the Office of the Chief Economist, Latin America and the Caribbean Region - is part of a larger effort in the region to measure and understand the impact of labor market rigidities on employment and poverty.

Using the firm-level panel datasets and hand-collected data on county level minimum wage, this paper estimates the effect of minimum wage on firm profitability. As firms may take time to adjust in response to changes in minimum wage, this paper estimates a dynamic panel model with lagged minimum wage. To capture the heterogeneous effect of minimum wage on profitability, this paper further estimates quantile regression dynamic panel model. The estimation results suggest that the effect on firm profitability of minimum wage in the current year is negative across the whole conditional distribution of profitability and it exhibits an inverted-U shape across conditional quantiles. The effect on profitability of lagged minimum wage is positive at the 5th, 10th, 15th quantiles, negative at the 90th and 95th quantiles, and not significant at other quantiles. Turning to the overall effect on profitability of minimum wage, we find that minimum wage exerts significantly negative effect on profitability at the 5th quantile and quantiles higher than 40th and the absolute value of the effect of minimum wage increases with these quantiles. For other quantiles, the overall effect of minimum wage on profitability is negligible.

We estimate the employment effects of changes in national minimum wages using a pooled cross-section time-series data set comprising 17 OECD countries for the period 1975-2000, focusing on the impact of cross-country differences in minimum wage systems and in other labor market institutions and policies that may either offset or amplify the effects of minimum wages. The average minimum wage effects we estimate using this sample are consistent with the view that minimum wages cause employment losses among youths. However, the evidence also suggests that the employment effects of minimum wages vary considerably across countries. In particular, disemployment effects of minimum wages appear to be smaller in countries that have subminimum wage provisions for youths. Regarding other labor market policies and institutions, we find that more restrictive labor standards and higher union coverage strengthen the disemployment effects of minimum wages, while employment protection laws and active labor market policies designed to bring unemployed individuals into the work force help to offset these effects. Overall, the disemployment effects of minimum wages are strongest in the countries with the least regulated labor markets.

We estimate the employment effects of changes in national minimum wages using a pooled cross-section time-series data set comprising 17 OECD countries for the period 1975-2000, focusing on the impactof cross-country differences in minimum wage systems and in otherlabor market institutions and policies that may either offset or amplify the effects of minimum wages. The average minimum wage effects we estimate using this sample are consistent with the view that minimum wages cause employment losses among youths. However, the evidence also suggests that the employment effects of minimum wages vary considerably across countries. In particular, disemployment effects of minimum wages appear to be smaller in countries that have subminimum wage provisions for youths. Regarding other labor market policies and institutions, we find that more restrictive labor standards and higher union coverage strengthen the disemployment effects of minimum wages, while employment protection laws and active labor market policies designed to bring unemployed individuals into the work force help to offset these effects. Overall, the disemployment effects of minimum wages are strongest in the countries with the least regulated labor markets.

The primary goal of a national minimum wage floor is to raise the incomes of poor or near-poor families with members in the work force. However, estimates of employment effects of minimum wages tell us little about whether minimum wages are can achieve this goal; even if the disemployment effects of minimum wages are modest, minimum wage increases could result in net income losses for poor families. We present evidence on the effects of minimum wages on family incomes from matched March CPS surveys, focusing on the effectiveness of minimum wages in reducing poverty. The results show that over a one-to-two year period, minimum wages increase both the probability that poor families escape poverty and the probability that previously non-poor families fall into poverty. The estimated increase in the number of non-poor families that fall into poverty is larger than the estimated increase in the number of poor families that escape poverty, though this difference is not statistically significant. We also find that minimum wages tend to boost the incomes of poor families that remain below the poverty line. The evidence indicates that in the wake of minimum wage increases, some families gain and others lose. On net, the various tradeoffs created by minimum wage increases more closely resemble income redistribution among low-income families than income redistribution from high- to low-income families. Given these findings it is difficult to make a distributional or equity argument for minimum wages.