Minimum Wage Increases Research Articles

Two birds, one stone: minimum wage and child labor

PurposeThis paper investigates the impact of quasi-exogenous and substantial increases in the minimum wage on child labor outcomes in Türkiye. The study aims to provide empirical evidence on how minimum wage policies affect child labor outcomes in a developing country context, with a focus on gender and age differences. It seeks to understand whether minimum wage increases lead to a reduction in child labor and whether the impact is different for various demographic groups.Design/methodology/approachThe research employs a difference-in-differences methodology using data from the 2012 and 2019 Child Labor Force Survey in Türkiye. The treatment group consists of children from households with minimum wage earners, while the control group comprises children from other households. Various labor market outcomes are analyzed, and robustness checks are performed.FindingsOur findings indicate that while the overall effect of minimum wage increases on child labor is statistically insignificant, there are notable heterogeneous impacts across different demographic groups and employment sectors. Specifically, we observe a significant reduction in the employment probability of girls under the age of 15 and unpaid family workers. Additionally, the likelihood of younger children being wage earners decreases, and the minimum wage increase reduces employment in the agriculture and services sectors for certain subgroups. The impact is also more limited for children in single-adult-worker households.Social implicationsThese results underscore the varying effects of minimum wage policies on child labor and highlight the importance of considering demographic and sectoral differences in policy formulation. Policymakers should complement such policies with income-generating programs and targeted education initiatives to address child labor issues more comprehensively and sustainably.Originality/valueThis study fills a critical gap in the limited international literature on the causal effects of minimum wage policies on child labor incidence. One notable exception, Menon and van der Meulen Rodgers (2018) have explored the impact of minimum wage on child labor in India using regional variation, our study uniquely analyzes the effects at the household level in Türkiye. This approach provides valuable insights into how minimum wage changes affect child labor outcomes in a developing economy context with a high prevalence of minimum wage earners. It also contributes to the broader economic understanding of child labor and household income dynamics.

The impact of a minimum wage increase on hours worked: heterogeneous effects by gender and sector

AbstractA minimum wage increase could lead to adverse employment effects for certain subgroups of minimum wage workers, while leaving others unaffected. This heterogeneity could be overlooked in studies that examine the overall population of minimum wage workers. In this paper, we test for heterogeneous effects of a minimum wage increase on the hours worked of minimum wage employees in Ireland. For all minimum wage workers, we find that a 10% increase in the minimum wage leads to a one‐hour reduction in weekly hours worked, equating to an hours elasticity of approximately −0.3. However, for industry workers and those in the accommodation & food sector, the impact is larger, with elasticity −0.8. We also find a negative impact on the hours worked among men on minimum wage, with no significant effect for women. This is due to the disproportionate number of men working in sectors that show the greatest impact on hours. In line with suggestions from the recent literature, we attempt to identify directly those in receipt of minimum wage using hourly wage data, while also studying the dynamic impact on hours worked over multiple time periods using a fully flexible difference‐in‐differences estimator.

Unintended workplace safety consequences of minimum wages

We investigate the unintended impact of minimum wage increases on workplace safety. Using establishment-level data from the United States and a cohort-based stacked difference-in-differences design, we find that large increases in minimum wages have significant adverse effects on workplace safety. Our findings indicate that, on average, a large minimum wage increase results in a 4.6 percent increase in the total case rate. Event study estimates show that this adverse effect persists in the medium run. Furthermore, we find a more salient effect for firms more likely to be financially constrained or subject to a higher labor market rigidity in firing workers. We provide suggestive evidence that small minimum wage increases might reduce injury rates, highlighting the potential heterogeneity in the impact of minimum wage changes. We do not find evidence that capital-labor substitution could be behind the findings.

Chinese Minimum Wages and Health

Variation in the timing of changes in the minimum wage across provinces in China is exploited using individual/household longitudinal survey data from 2010 to 2018 to examine potential health effects on working age individuals in households that are likely affected by minimum wages. Minimum wage increases are estimated to improve self-reported health particularly by reducing the incidence of self-reported overall poor health. There is also reasonably strong evidence that they reduce unhappiness and lower dissatisfaction with less robust evidence that they improve mental health and lower recent discomfort. Importantly, there is a type of “dose-response” effect: the estimates indicate no health effects of minimum wage increases on those in households likely not affected financially by the minimum wage with health effects increasing the more likely the household is financially affected. The results are driven by the findings for males.

Can minimum wage increases narrow the gender wage gap? Evidence from China

ABSTRACT Using data from the 2011–2019 China Household Finance Survey (CHFS), this paper examines the effect of minimum wage increases on the gender wage gap. The results show that minimum wage increases can significantly reduce the gender wage gap. We further examine the impact of minimum wages on the gender wage gap across the wage distribution and find that minimum wages are conducive to narrowing the gender wage gap at the bottom and middle parts of the wage distribution, but not conducive to reducing the gender wage gap at the upper part of the wage distribution. We also identity heterogeneous effects of minimum wages on the gender wage gap across age, education level, hukou, and work unit. Finally, we find that minimum wages have a negative effect on low-wage workers’ employment. Therefore, governments need to weigh their role in reducing the gender wage gap against the potential negative employment effects when adjusting the minimum wage standard.

Pengaruh PDRB dan Upah Minimum Provinsi Terhadap Kemiskinan dan IPM di Provinsi-Provinsi Indonesia

Public welfare is the ultimate goal of every economic development. HDI as an indicator of welfare in Indonesia continues to increase from year to year, but is very volatile. The province with the highest HDI points is DKI Jakarta province and the lowest is Papua Province. This shows that the increase has not occurred significantly and there are still disparities in several provinces in Indonesia. This research aims (1) To analyze the direct influence of GRDP and minimum wages on poverty in Indonesian provinces in 2018-2022. (2) To analyze the influence of GRDP, minimum wage and poverty directly on HDI in Indonesian provinces in 2018-2022. (3) To analyze the influence of GRDP and minimum wages on HDI indirectly through poverty in Indonesian provinces in 2018-2022. This research uses secondary data obtained from BPS publications during 2018-2022, with a total of 170 observation points. The data analysis technique used is path analysis with the help of EViews 10 software. The results of the study indicate that PDRB has a significant negative direct effect on poverty, Provincial Minimum Wage has a significant positive direct effect on poverty, both PDRB and Provincial Minimum Wage have a significant positive direct effect on the HDI, and poverty has a significant negative direct effect on the HDI. Poverty is not an intervening variable in the relationship between PDRB and the HDI, but it is an intervening variable in the relationship between Provincial Minimum Wage and the HDI. The implications of this research are that successful economic policies must integrate increases in Gross Regional Domestic Product (GRDP) and Minimum Wage as primary strategies to reduce poverty levels and enhance the Human Development Index (HDI) in Indonesian provinces. Significant increases in GRDP contribute to poverty reduction by evenly distributing economic benefits to disadvantaged groups. Meanwhile, strengthened Minimum Wage policies can elevate worker incomes, bolster purchasing power, and improve access to education and healthcare, thereby potentially boosting HDI. Prioritising poverty reduction is crucial for enhancing overall quality of life, thereby creating better conditions for economic growth and social welfare at the provincial level

Inflation’s Reduction of the Real Minimum Wage and Unemployment in the USA: 1987 to 2021

<p class="MsoNormal" style="margin-top: 12pt; text-align: justify;"><span lang="EN-US" style="font-family: 'times new roman', times, serif; font-size: 14pt;">Hundreds of articles have been written that include empirical estimates of the dis-employment effects of minimum wages; however, many of these articles find statistically insignificant effects, some find significant negative effects, and a few find significant positive effects. Most of these studies use multivariate analyses which can be criticized for omitting key variables. The omitted variables problem ruins all statistics and estimates. This paper uses reiterative truncated projected least squares (RTPLS), a solution to the omitted variables problem, to estimate the percentage increase in unemployment due to a one percent increase in the real minimum wage using monthly data for the 50 states of the USA from 1987 to 2021. RTPLS produces a separate elasticity for every observation where differences in these estimates are due to omitted variables. We argue that RTPLS solves most of the econometric problems that David Neumark identified in his keynote address at a minimum wage conference in Berlin in 2018. We find that the percentage change in the unemployment rate due to a one percent change in the minimum wage ranges between 1.156 and 3.389, that the elasticities for different states tend to move together over time, and that all these elasticities are statistically significant at a 95 percent confidence level.</span></p>

Effects of the Minimum Wage (MW) on Income Inequality: Systematic Review and Analysis of the Spanish Case

The minimum wage has become a standard measure in the economic and social policies of countries all over the world. The primary objective of this measure is to guarantee that workers receive a minimum wage that allows them to lead a decent life, thereby reducing inequality and poverty. However, studies on the minimum wage have not focused on assessing the effects on these dimensions but only on employment. The objective of this study is to address this research gap by analysing the effects of minimum wage increases on income inequality and poverty. To this end, firstly, a systematic review of the empirical analyses was conducted using the PRISMA methodology, with a view to ensuring that all empirical evidence was available. Secondly, the Spanish case was examined. The significant increase in minimum wage in Spain in 2019 (21.3% in real terms) presents an invaluable opportunity to utilise this event as a natural experiment to generate new evidence. A difference-in-differences approach was employed to assess the impact of this phenomenon in the period 2018–2019 with microdata from European Statistics on Income and Living Conditions (EU-SILC for Spain). In doing so, two basic scientific contributions were made. The first one, a systematic, exhaustive, and up-to-date literature review (up to June 2024), as there is, to our knowledge, no recent systematic review of this relationship (minimum wage vs. inequality). The available evidence indicates a clear inverse relationship between the minimum wage and inequalities and poverty. The second one, regarding the Spanish case, there has been a dearth of scientific studies on this subject. Thus, this paper provides new scientific evidence demonstrating that a significant increase in the minimum wage can significantly improve the income of low-wage earners, thereby reducing income inequality and in-work poverty. Furthermore, there is evidence of a spillover effect towards income groups closer to the treatment group.

Minimum wage and internal labor migration: Evidence from China

We study the geographical allocation consequences of minimum wage, using individual-level migration data and the substantial variation over time in minimum wages across 262 counties in China. Our preferred specification shows that a 10% increase in the local minimum wage decreases the probability of outmigration by 1.52 percentage points. Using data from a major online recruitment platform, we further corroborate the main finding by showing that workers are less likely to search for a job in other cities when their city of residence experiences an increase in minimum wage.

The Potential of Minimum Wage Increases to Reduce Youth Homicide Disparities: Diminishing Returns for Black Youth.

We examine and compare the relationship between minimum wage increases and youth homicide rates in three groups: all youth, White youth only, and Black youth only. Using 2001-2019 mortality data from the National Vital Statistics System (NVSS) for all 50 states and Washington DC, we apply a difference in differences (DD) design to compare the change in youth homicides across states with varying changes in the state-specific minimum wage. With the inclusion of state-specific linear time trends, we find that a $1 increase in minimum wage leads to a significant 4% reduction (RR = 0.96, 95%CI [0.92, 0.99]) in homicides among White youth, but no significant reduction among Black youth (RR = 0.98, 95%CI [0.91, 1.04]). Findings are consistent with research on marginalization-related diminished returns for Black youth. While minimum wage increases are a promising step to reduce youth homicides overall, reducing homicide disparities experienced by Black youth requires additional components. Future research should examine policies with the specific intention to dismantle structural racism.

An optimal transport approach to estimating causal effects via nonlinear difference-in-differences

Abstract We propose a nonlinear difference-in-differences (DiD) method to estimate multivariate counterfactual distributions in classical treatment and control study designs with observational data. Our approach sheds a new light on existing approaches like the changes-in-changes estimator and the classical semiparametric DiD estimator, and it also generalizes them to settings with multivariate heterogeneity in the outcomes. The main benefit of this extension is that it allows for arbitrary dependence between the coordinates of vector potential outcomes and includes higher-dimensional unobservables, something that existing methods cannot provide in general. We demonstrate its utility on both synthetic and real data. In particular, we revisit the classical Card & Krueger dataset, which reports fast food restaurant employment before and after a minimum wage increase. A reanalysis with our methodology suggests that these restaurants substitute full-time labor with part-time labor on aggregate in response to a minimum wage increase. This treatment effect requires estimation of the multivariate counterfactual distribution, an object beyond the scope of classical causal estimators previously applied to this data.

Analisis Investasi Dalam Negeri, Upah Minimum, dan Pengeluaran Pemerintah Terhadap Jumlah Penduduk Miskin di Provinsi Jawa Timur

The main goal in the global Sustainable Development Goals (SDGs) agreement is to end poverty. Appropriate and efficient government intervention is needed to reduce poverty. This research analyzes the influence of domestic investment, minimum wages and government spending in reducing poverty in East Java. Multiple linear regression analysis was used as parameter estimation for this research. The data used a time series period 2008-2022. The results show that there is a significant negative relationship between domestic investment and government spending on the poor people. This means that when domestic investment and government spending increase, it will reduce the poor people in East Java. However, this is different from the minimum wage which has a positive and significant relationship to the poor people. When the minimum wage increases, it has no effect on the number of poor people in East Java. So it can be concluded that the government can optimize domestic investment and government spending to end the problem of poverty in East Java.

Wages and Employment in the Netherlands, 2017–2023

This research documents changes in employment and wages in the Netherlands for different types of workers. We compare 2017 to 2023 using regression-adjusted wages to make sure changes in composition of the workforce do not influence our estimates. The research period has been characterised by high labour demand, negative supply shocks, high levels of inflation and economic lockdowns, all of which have contributed to substantial labour-market dynamics. Our findings suggest that employment has been growing by 2 percent in the period 2017–2023, of which 1.8 percent has been due to additional workers finding employment. Women have experienced the largest increase in employment, while the employment of men on temporary contracts has slightly fallen. Wages have been rising for workers at the bottom of the wage distribution. From the median of the wage distribution onwards real gross hourly wages have been fallen. The most likely explanation for rising wages at the bottom is the stepwise increase in minimum wages enforced by new labour-market legislation.

The effects of the job stabilization fund on employment

ABSTRACT The job stabilization fund in Korea was introduced to mitigate the negative impacts of a sharp increase in the minimum wage in 2018. This study estimates the employment effect of the fund by considering that only firms with fewer than 30 employees are eligible for the fund and using an empirical model that allows for interaction between exposure to the minimum wage (treatment intensity) and a policy dummy variable in a standard DID model. The estimation results show that the fund greatly alleviates the adverse effects of the minimum wage increase on employment: firms not receiving the fund significantly decrease employment for all cases, while those receiving it either slightly decrease or even increase employment in response to the minimum wage hike in 2018.

Madam Yellen is right about minimum wage policies: evidence from millions of sole proprietors

During her nomination hearing, Janet Yellen defended the benefits of a higher minimum wage (Question 66 and follow-up). This study analyzes the impact of minimum wage policies on the profitability of sole proprietors by using a dataset of 430 million reported net incomes with the IRS from 2004 to 2018. Three methods are used to examine the relationship between minimum wage increases and net income for sole proprietors: A panel regression framework that includes all counties, comparing contiguous border county-pairs, and a difference-in-differences approach. We find that minimum wage hikes are associated with a higher net income for sole proprietors, with estimated elasticity between 0.15 and 0.2.

Minimum wages and household income distribution: Evidence from China

AbstractBased on the 2004–2015 China Health and Nutrition Survey (CHNS) data, this article examines the effect of minimum wages on household income distribution. The results show that minimum wage increases significantly reduce the probability of per capita household net income falling below the poverty threshold, indicating that minimum wage can play a role in poverty reduction. Furthermore, we find that minimum wages significantly reduce the probability of per capita household income being 0–3 times lower than the poverty threshold, but have little effect on households with per capita net income more than 3 times the poverty threshold, which means that minimum wage increases can reduce household income inequality. We also find heterogeneous effects of minimum wage increases on household income distribution across gender, education, hukou, and age of household heads. Finally, we show that minimum wage increases play a role in regulating household income distribution by increasing the wages of employed individuals in households.

CGE Analysis of the Impact of the 2024 Minimum Wage Increase on the National Economy in Indonesia

One of the minimum wage problems is caused by workers/laborers' needing to agree with the wage increase set. The minimum wage increase is still minimal compared to the high worker need. The Labor Organization president called the government to raise the provincial minimum wage (UMP) and district/city minimum wage (UMK) 2024 by 15%. This figure is obtained from the Decent Living Needs (KHL) survey results and other indicators such as inflation and economic growth. On the other hand, the minimum wage increase of 15% is considered by employers to be unrealistic, considering the condition of the national economy is hit by uncertainty. The government said that determining the minimum wage based on PP 36/2021 and considering the welfare of workers/laborers’ also looks at the Company's capabilities. This paper aims to see new macroeconomic and welfare conditions due to the increase in the minimum wage by 15%. Using the general equilibrium model of static computing (CGE), the analysis results show that an increase in the minimum wage leads to a decrease in demand for labor, especially in labor-intensive sectors. The increase in wages impacts increasing household income, thus indicating an increase in household welfare. However, inflationary pressures brought about by the minimum wage increase mask the increase in revenue, resulting in a decrease in household consumption budgets. This translates into a loss of net well-being, with a more significant impact on urban households than rural households. The output of most sectors, especially labor-intensive sectors, declined, but nominal GDP increased. The increase in nominal GDP is due to rising prices, not actual economic output.

Willingness to pay for improved working conditions of nurses: Results from a factorial survey experiment in Germany

BackgroundMany countries face substantial shortages of skilled nurses. With an aging population and global demographic changes, developing a skilled workforce of nurses has become one of the central challenges for public health care. The recent COVID-19 pandemic has exacerbated labor shortages, which pose a threat to the quality of publicly provided health care. Improving nurses' working conditions could be a means by which to address the global shortages of nurses. However, in countries with public health care, such improvements may come with additional costs in the form of higher taxes or social security contributions. Therefore, such improvements partly depend on people's willingness to pay (WTP) for them. ObjectiveIn this paper, we investigate workers' willingness to pay for improvements in the working conditions of nurses. DesignThis study is a factorial survey experiment included as part of an online survey. Setting(s)The factorial survey experiment was implemented within the high-frequency online panel survey “Life and Employment in Times of Corona” (IAB-HOPP) conducted by the Institute for Employment Research (Germany). ParticipantsWe analyze data from N = 2128 survey participants; our main analysis consists of N = 6384 responses from those participants. MethodsOur research is based on a factorial survey experiment (vignette analysis) designed to quantitatively measure the willingness to pay for various improvements in the working conditions of nurses. We use random effect models and mixed models to estimate the individual-level willingness to pay for these improvements. ResultsOur results show that the survey participants are generally willing to pay for particular policies aimed at improving the working conditions of nurses. However, the amount that respondents are willing to pay varies with the type of policy changes. Survey participants exhibit a high willingness to pay for increases in minimum wages for nurses and wage-related improvements in general. We find, however, a lower willingness to pay for the right to participate in training courses aimed at reducing work-related stress. ConclusionsThe broad support for improvements in the working conditions of nurses provides policymakers with some guidance in implementing policy measures that might address labor shortages in the nursing sector. RegistrationThere was no preregistration. Tweetable abstractMany people are willing to pay extra to improve the working conditions of nurses. Wage-related increases for nurses show the highest willingness to pay.

Local minimum wage laws, boundary discontinuity methods, and policy spillovers

We use geographically precise longitudinal employment data documenting worker job-to-job mobility to study policy spillovers in the context of three local minimum wage increases. Estimated spillover impacts on wages and hours are statistically significant, geographically diffuse, and sufficient to create concern regarding interpretation of results even using not-immediately-adjacent regions as controls. Spillover effects appear less concerning with smaller interventions or those adopted in smaller jurisdictions. The boundary discontinuity method of causal inference may yield misleading results if a policy’s impacts do not stop at the border of the implementing jurisdiction.

Long-term responses to large minimum wage shocks: Subminimum and super-minimum workers in Slovenia

This study examines long-term effects of a large minimum wage increase in Slovenia, covering the universe of employed and unemployed workers. By distinguishing subminimum and super-minimum workers, we find large, persistent disemployment effects for the subminimum group whose productivity fell below the rising minimum wage, both due to lower probability of remaining employed and of finding a job if non-employed. The shock to firm wage bills caused by the minimum wage creates a substitution toward workers whose marginal revenue products are slightly above the minimum wage, but the most skilled are complements with the subminimum workers in their firm.