Effects Of Minimum Wage Research Articles

Does measurement error explain the increase in subminimum wage payment following minimum wage increases?

In analyses of minimum wages, positive “ripple effects” and subminimum wages are difficult to distinguish from measurement error. Indeed, prior work posits that a simple, symmetric measurement error process may underlie both phenomena in Current Population Survey data for the full working age population. We show that the population-wide symmetry between spillovers and subminimum wage payment is illusory in that spillovers accrue to older individuals while subminimum wage payment accrues to the young. Symmetric measurement error cannot explain this heterogeneity, which increases the likelihood that both spillovers and subminimum-wage payment are real effects of minimum wage increases rather than artifacts of measurement error.

Monopsony power and the demand for low-skilled workers

AbstractThis study analyses firms’ labour demand when employers have at least some monopsony power. It is argued that without taking into account (quasi-)monopsonistic structures of the labour market, wrong predictions are made about the effects of minimum wages. Using switching fractional panel probit regressions with German establishment data, I find that slightly more than 80% of establishments exercise some degree of monopsony power in their demand for low-skilled workers. The outcome suggests that a 1% increase in payments for low-skilled workers would, in these firms, increase employment for this group by 1.12%, while firms without monopsony power reduce the number of low-skilled, by about 1.63% for the same increase in remuneration. The study can probably also be used to explain the limited employment effects of the introduction of a statutory minimum wage in Germany and thus leads to a better understanding of the labour market for low-skilled workers.

The effects of minimum wages over the business cycle: the Great Recession

PurposeThis paper examines disemployment effects of minimum wages during the period 2002–2010.Design/methodology/approachThe authors employ the discontinuity design.FindingsThe authors find that minimum wages had a significant negative impact on teen employment before the Great Recession. During the Great Recession, the disemployment effects of minimum wages were insignificant. The finding is consistent with the evolution of firms’ market power during the business cycle.Originality/valueThe authors attempt to reconcile the debate about the effects of minimum wages on US employment.

Raising the Bar: Minimum Wages and Employers’ Hiring Standards

Many scholars have studied the employment effects of minimum wages, but little is known about effects on the composition of hires. I investigate whether Germany’s minimum wage introduction raised hiring standards, using worker fixed effects as a proxy for worker productivity. For the least productive workers hired, the minimum wage led to a 4 percentile point shift in the productivity distribution. This increase is missed using standard observable measures of worker productivity. The effects are larger with greater pre-reform screening intensity—indicating an employer response. This more selective hiring compensates about two-thirds of higher wage costs for the least productive hires. (JEL J23, J24, J31, J38, M51)

An Empirical Analysis on the Effect of Minimum Wage on Entrepreneurial Activity Using Fractional Polynomial Regression Model

본 연구는 글로벌 기업가정신 모니터(GEM)의 창업 활동, 창업에 대한 개인적 인식 및 사회적 가치 자료와 OECD의 시간당 실질 최저임금 자료를 이용해 최저임금의 변화가 창업에 미치는 영향을 실증적으로 분석하였다. 표본 자료에서 관찰된 창업과 최저임금 간 비선형 관계를 설명하기 위해 우리는 다항식 모형의 유연성을 높인 분수 다항식(fractional polynomial) 회귀 모형을 사용하였다. 분석 결과에 따르면 최저임금의 2차 모형과 분수 다항식 모형에서 모두 창업과 최저임금은 역U자형 상관관계를 보였다. 분수 다항식 추정 결과에서 창업이 극대화되는 시간당 최저임금은 $6.3였는데, 시간당 최저임금이 $6.5 이상이었던 2016년 이후 우리나라에서는 최저임금의 인상이 창업 의욕을 위축시켰을 것이라고 추론할 수 있다. 분수 다항식 추정 결과는 최저임금 변화에 반응하는 창업의 변화 속도에서도 2차 모형과 차이를 보였다. 분수 다항식 회귀 결과에서 창업을 최대로 하는 수준보다 최저임금이 낮으면 최저임금이 증가함에 따라 창업이 빠르게 증가하였다. 반면 창업을 최대로 하는 수준보다 최저임금이 높으면 최저임금이 증가함에 따라 창업이 완만하게 감소할 것으로 예측되었다. 본 연구 결과는 종속변수와 설명변수 간 비선형 관계를 설명함에 있어 분수 다항식과 같이 유연한 함수 형태를 갖춘 회귀 모형을 이용할 필요가 있음을 보여준다.

Myth or measurement: What does the new minimum wage research say about minimum wages and job loss in the United States?

AbstractThe disagreement among studies on the employment effects of minimum wages in the United States is well known. Less well known, and more puzzling, is the absence of agreement on what the research literature says—that is, how economists summarize the body of evidence on the employment effects of minimum wages. Summaries range from “it is now well established that higher minimum wages do not reduce employment,” to “the evidence is very mixed with effects centered on zero so there is no basis for a strong conclusion one way or the other,” to “most evidence points to adverse employment effects.” We explore the question of what conclusions can be drawn from the literature, focusing on the evidence using subnational minimum wage variation within the United States that has dominated the research landscape since the early 1990s. To accomplish this, we assembled the entire set of published studies in this literature and identified the core estimates that support the conclusions from each study, in most cases relying on responses from the researchers who wrote these papers. Our key conclusions are as follows: (i) there is a clear preponderance of negative estimates in the literature; (ii) this evidence is stronger for teens and young adults and the less educated; (iii) the evidence from studies of directly affected workers points even more strongly to negative employment effects; and (iv) the evidence from studies of low‐wage industries is less one‐sided.

Minimum Wage Increases and Vacancies

Using a unique data set and a novel identification strategy, we estimate the effect of minimum wage increases on job vacancy postings. Utilizing occupation-specific county-level vacancy data from the Conference Board’s Help Wanted Online for 2005-2018, we find that state-level minimum wage increases lead to substantial declines in existing and new vacancy postings in occupations with a larger share of workers who earn close to the prevailing minimum wage. We estimate that a 10 percent increase in the state-level effective minimum wage reduces vacancies by 2.4 percent in the same quarter, and the cumulative effect is as large as 4.5 percent a year later. The negative effect on vacancies is more pronounced for occupations where workers typically have lower educational attainment (high school or less) and in counties with higher poverty rates. We argue that our focus on vacancies versus on employment has a distinct advantage of highlighting a mechanism through which minimum wage hikes affect labor demand. Our finding of a negative effect on vacancies is not inconsistent with the wide range of findings in the literature about the effect of minimum wage changes on employment, which is driven by changes in both hiring and separation margins.

The impact of increasing the United Kingdom national minimum wage on self-reported health.

There is a growing but mixed literature on the health effects of minimum wages. If minimum wage changes have a statistically significant impact on health, this suggests health effects should be incorporated into cost‐benefit analyses to capture wider policy impacts. Whilst most existing UK based literature examines the introduction of a minimum wage, this paper exploits the 2016, 2017 and 2018 UK National Minimum Wage (NMW) increases as natural experiments using a series of difference‐in‐differences models. Short Form‐12 (SF‐12) mental and physical component summary scores are used as dependent variables. In the base case and all sensitivity analyses, the estimated impact of NMW increases on mental and physical health are insignificant. The policy implication is that health effects should not be included in cost‐benefit analyses examining the NMW.

Investigating the Impact of Minimum Wages on Jordan’s Industrial Exports

The purposes of the paper was to discusses the effects of minimum wages on industrial exports of Jordan and its main focus is on the empirical view of minimum wages and their significance in industrial exports in Jordan. A mixed-method approach has been selected where primary and secondary analysis of the data has been conducted to assess the impact of minimum wages on Jordan’s industrial exports. The key findings of the paper revealed that there is a significant and positive relationship between industrial exports and minimum wages. In addition, the Pearson correlational value is .411, which means there is a significant and moderate correlation between these two variables. Moreover, the standardized beta coefficient of minimum wages is .411, which is moderate. 1 % change in minimum wages brings about 41.1% changes in industrial exports. Therefore, it is concluded that there is a significant and positive influence of minimum wages on industrial exports. The researchers are intending to investigate the minimum wages in individual sectors, more precisely the influence of minimum wages on Jordanian pharmaceutical industry.

Effects of the Minimum Wage on Small Firms in China: Spillover Effects from Large Firms

Abstract This study investigates how minimum wage affects small firms through spillover effects from large firms. Using firm-level panel data from Anhui Province in China, we find that after a minimum wage increase, small firms will reduce workers’ wages and create jobs due to the inflow of displaced workers from large firms. This spillover effect is larger for micro firms and private firms, where minimum wage compliance tends to be lower. We also find that high-tech small firms are more affected than low-tech ones because of their greater demand for skilled labor. Our findings not only highlight the unintended consequences of minimum wage on small firms in China, but also help to explain the ambiguous employment effects of minimum wage on the covered sector in developing countries.

Push or Pull? Measuring the labor supply response to the minimum wage using an individual-level panel

ABSTRACT For individuals in low-wage labour markets, an increase in the minimum wage can theoretically pull them into or push them out of the labour force. If increases raise expected wages beyond reservation wages, marginal individuals could enter the labour force and begin searching for employment. If increases lower expected wages, marginal individuals already in the labour force could exit. Leveraging revised individual identifiers in the U.S. Current Population Survey, this research estimates the contemporaneous effects of minimum wage increases on labour force participation. The use of within-person variation, short individual panels, and flexible controls for time create an empirical strategy that mitigates potential biases from unobserved constant individual-level heterogeneity and time-varying factors. This research finds that minimum wage changes tend to impact the youngest individuals, but there is substantial heterogeneity in responses by age, race/ethnicity, and sex. There is stronger evidence of pull effects amongst young white men and Latinos, and weaker evidence amongst young Black women and older Latinas. Weak evidence of push effects is observed amongst younger white women, younger Latinos, and older Latinas. This research highlights heterogeneous labour force participation responses to further inform our understanding of search behaviour and labour market churn.

The Effect of Minimum Wages on Consumer Bankruptcy

The Effect of Minimum Wages on Consumer Bankruptcy

What's Across the Border? Re-Evaluating the Cross-Border Evidence on Minimum Wage Effects

What's Across the Border? Re-Evaluating the Cross-Border Evidence on Minimum Wage Effects

Minimum Wage in a Multi-Tier Search and Wage-Posting Model with Cross-Market Substitutions

While minimum wage policy is widely adopted in the real world, can it effectively raise the average wage of lower paid jobs without having large detrimental consequences for employment? The empirical literature fails to establish robust findings. We develop a general-equilibrium search and wage-posting framework with heterogeneous workers and tasks matching in multi-tier labor markets: abstract, routine high-skilled, routine middle-skilled, manual middle-skilled and manual low-skilled. We incorporate rich cross-market spillovers and compositional effects from individual responses to market thickness. As a result of minimum wage hikes, we show that (i) the unemployment rate at the minimum wage binding market is higher, while all other markets enjoy a lower unemployment rate; (ii) employment in the manual low-skilled jobs is lower, whereas employment in the routine high-skilled and manual middle-skilled markets is higher due to cross-market substitutions; and, (iii) employment in other markets has ambiguous responses due to conflicting effects on potential worker entry and unemployment. By calibrating the model to fit the U.S. data, we evaluate the impacts of the federal minimum wage hike (2007-2009) and the on-going minimum wage increase in Seattle (2017-2021). We find that the minimum wage effects on employment on the binding markets depend crucially on the magnitudes of spillover and compositional effects and that the employment effects may be weak in a nonbinding market. Moreover, our results suggest that, while both minimum wage hikes reduce aggregate output, they only generate small effects on submarket average and overall average wages. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

What's Across the Border? Re-Evaluating the Cross-Border Evidence on Minimum Wage Effects

What's Across the Border? Re-Evaluating the Cross-Border Evidence on Minimum Wage Effects

Distributional Effects of Local Minimum Wages: A Spatial Job Search Approach

Distributional Effects of Local Minimum Wages: A Spatial Job Search Approach

Crossover Design and Evaluation of Labor Market Effects of Minimum Wages in China

Crossover Design and Evaluation of Labor Market Effects of Minimum Wages in China

The Effect of Increasing State Minimum Wage on Family Caregiving

Paid long-term care workers, such as personal care aides, compliment family caregivers in the delivery of care for people with long-term care needs. Nearly 12% of paid long-term care workers live in poverty. There is a call to raise the federal minimum wage from $7.25/hr to $15/hr. Long-term care workers may financially benefit from an increase in minimum wage, but families that rely on paid long-term care may be unable to afford higher wages. We obtained Health and Retirement Study (HRS; 2006-2014) respondents’ state of residence which we linked with state minimum wage data. Between 2006 and 2010 the federal minimum wage increased from $5.15 to $7.25. We identified 25 states in which the 2006 to 2010 (pre period) increases in federal minimum wage increased the state’s effective minimum wage (higher of state and federal minimum wage). Seven of these states continued to increase their minimum wage from 2010 to 2014 (post period). The remaining 18 matching control states did not increase their minimum wage after 2010. We used a difference-in-differences design and ordinary least squares regression to compare hours of unpaid and paid caregiving HRS respondents received in treatment and control. There was no statistically significant change in unpaid (-2.15; 95%CI: -8.53, 4.23) or paid (2.42; 95%CI: -1.33, 6.20) caregiving hours received between HRS respondents that lived in states that did and did not increase their minimum wage. Increasing state minimum wage may improve the economic wellbeing of long-term care workers without adversely affecting people with long-term care needs.

Effects of recent minimum wage policies in California and nationwide: Results from a pre‐specified analysis plan

AbstractWe analyze the impacts of recent city minimum wage increases in California and nationwide, following a pre‐analysis plan (PAP) registered prior to the release of data covering two years of minimum wage increases. For California cities, we find a hint of negative employment effects. Nationally, we find some evidence of disemployment effects for teens, but not young adults or high school dropouts. City‐specific analyses provide limited evidence of adverse effects on the share low‐income, but the pooled city analysis does not; the national analysis generally finds no impact on the share low‐income, except for reductions in the share near‐poor, although that may at least partly reflect prior trends. All told, we view the results as providing neither strong evidence of substantial adverse effects of city minimum wages, nor strong evidence of substantial beneficial effects.

Minimum Wage Effects under Informality: Evidence from Turkey

Minimum Wage Effects under Informality: Evidence from Turkey