Minimum Wage Employment Research Articles

The Effect of the Minimum Wage on Prices in Brazil

There is very little empirical evidence on the effects of the minimum wage on prices in the international literature and none whatsoever for developing countries. This paper estimates the minimum wage price effect using monthly Brazilian household and firm data from 1982 to 2000 aggregated at a regional level. Empirical evidence on price effects will help to answer the question of who pays for the higher costs: firms, consumers or the unemployed. The answer to this question is a contribution to the controversial recent debate in the literature over the direction of the minimum wage employment effect. Employment might not be affected if firms are able to pass through to prices the higher labour costs associated to a minimum wage increase. In that case, consumers pay for the increase. Furthermore, if the poor consumers are those buying minimum wage labour intensive goods, or if these goods represent a large proportion of their consumption bundle, then minimum wage increases might hurt rather than aid the poor. Moreover, if minimum wage increases cause inflation, they will hurt the poor further, who disproportionately suffer from it. Robust results indicate that the minimum wage raises overall prices in Brazil. The resulting inflation is slightly higher for the poor than for the rich in the long run, smaller in low inflation periods, and larger in poorer regions.

Political Variables as Instruments for the Minimum Wage

Following the early 1980s apparent consensus, there has been a controversial debate in the literature over the direction of the minimum wage employment effect. Explanations to nonnegative effects range from theoretical to empirical identification and data issues. An explanation, however, that has not been sufficiently explored is that a non-negative effect might be an upward biased estimate of a truly negative effect, resulting from the simultaneous determination of the minimum wage and employment. This paper estimates the employment effect of the minimum wage using a number of political variables - not previously used in the literature - as excluded exogenous instruments to control for the endogeneity of the minimum wage variable. The data used is an under-explored Brazilian monthly household survey from 1982 to 2000. Robust results indicate that an increase in the minimum wage has very small adverse effects on employment.

The Wage and Employment Dynamics of Minimum Wage Workers

This study uses panel data to examine the wage and employment dynamics of minimum wage workers. Compared with workers earning above the minimum, minimum wage workers are much more likely to be new entrants or to exit the labor market. Changes in industry, occupation, and access to job training are particularly important to improving the wages of minimum wage workers. Many minimum wage workers earn less than their potential wage temporarily because of nonwork circumstances that make higher-paying jobs less attractive. duration of minimum wage employment. At one extreme, if minimum wage workers were entry-level workers who quickly accumulate skills that push their wages above the minimum, a minimum wage hike would have a relatively short term effect on any given worker's income. On the other extreme, if all minimum wage workers find themselves in dead end jobs that provide no opportunities for wage growth, a hike in the minimum wage could have long-term effects on their incomes. There are several studies that provide insights into the wage growth of minimum wage workers. Using 1984-1985 data from the Survey of Income and Program Participation (SIPP), Smith and Vavrichek (1992) show that over 60% of workers earning the minimum wage in 1984 were earning more than the minimum wage one year later. For those with wage gains, the typical wage increase was approximately 20%. Long (1999) finds similar results using the 1992-1993 SIPP. Using National Longitudinal Survey data from the early 1980s, Schiller (1994) finds that, after entering a minimum wage job, only 15% of continuing workers were still earning the minimum wage after three years. While most minimum wage workers realize sufficient wage growth to rise above the minimum wage relatively quickly, a significant minority does not. The existing literature provides some insight into which workers are most likely to be stuck at the minimum. A fairly consistent finding is that less educated workers and part-time workers are less likely to rise above the minimum. However, the understanding of the processes at work in determining the extent of wage growth is limited.

The impact of differential payroll tax subsidies on minimum wage employment

In this article, we study the impact of changes of total labor costs on employment of low-wage workers in France in a period, 1990 to 1998, that saw sudden and large changes in these costs. We use longitudinal data from the French Labor Force survey (« enquête emploi ») in order to understand the consequences of real decreases and real increases of the labor cost. We examine the transition probabilities from employment to non-employment and from non-employment to employment. In particular, we compare the transition probabilities of the workers that were directly affected by the changes (“between” workers) with the transition probabilities of workers closest in the wage distribution to those directly affected (“marginal” workers). In all years with an increasing minimum cost, the “between” group (or the treated using the vocabulary of controlled experiments) comprises all workers whose costs in year t lie between the old (year t) and the new (year t+1) minimum. In all years with a decreasing minimum, the “between” group comprises all workers whose costs in year t+1 lie between the present minimum cost (year t+1) and the old (year t) minimum cost. The results can be summarized as follows. Comparing years of increasing minimum cost and decreasing minimum cost, difference-in-difference estimates imply that an increase of 1% of the cost implies roughly an increase of 1.5% in the probability of transiting from employment to non-employment for the treated workers, the resulting elasticity being −1.5. Second, results for the transitions from non-employment to employment are less clear-cut. Tax subsidies have a small and insignificant impact on entry from non-employment as well as on transitions within the wage distribution. Finally, we show that the “marginal” group constitutes a good control group. In addition, there is no obvious evidence of substitution between the “between” and “marginal” groups of workers, but there is some evidence of substitution between workers within the tax subsidy zone, with wages above those of the “marginal”, and workers outside the subsidy zone.

The Impact of Differential Payroll Tax Subsidies on Minimum Wage Employment

In this article, we study the impact of changes of total labor costs on employment of low-wage workers in France in a period, 1990 to 1998, that saw sudden and large changes in these costs. We use longitudinal data from the French Labor Force survey (enquete emploi) in order to understand the consequences of real decreases and real increases of the labor cost. We examine the transition probabilities from employment to non-employment and from non-employment to employment. In particular, we compare the transition probabilities of the workers that were directly affected by the changes (between workers) with the transition probabilities of workers closest in the wage distribution to those directly affected (marginal workers). In all years with an increasing minimum cost, the group (or the treated using the vocabulary of controlled experiments) comprises all workers whose costs in year 1998 lie between the old (year t) and the new (year t+1) minimum. In all years with a decreasing minimum, the group comprises all workers whose costs in year 1998 t+1 lie between the present minimum cost (year t+1) and the old (year t) minimum cost. The results can be summarized as follows. Comparing years of increasing minimum cost and decreasing minimum cost, difference-in-difference estimates imply that an increase of 1% of the cost implies roughly an increase of 1.5% in the probability of transiting from employment to non-employment for the treated workers, the resulting elasticity being -1.5. Second, results for the transitions from non-employment to employment are less clear-cut. Tax subsidies have a small and insignificant impact on entry from non-employment as well as on transitions within the wage distribution. Finally, we show that the marginal group constitutes a good control group. In addition, there is no obvious evidence of substitution between the and marginal groups of workers, but there is some evidence of substitution between workers within the tax subsidy zone, with wages above those of the marginal, and workers outside the subsidy zone.

Below-minimum-wage workers: Implications for minimum-wage models

Prior research on minimum wage employment tends to assume that coverage is either universal or easily estimated. In reality, coverage of teenagers and youth is low and results from a diversity of both employer and employee characteristics. Failure to recognize this has biased prior estimates of noncompliance and displacement. This study uses the NLSY to document the prevalence of below-minimum wage jobs among young workers and show their links to both worker and employer characteristics.

Vietnamese refugees and blocked mobility.

"This paper examines data from published sources and ethnographic studies conducted by the authors in Oakland, California and Philadelphia [Pennsylvania] to assess the economic situation of Vietnamese refugees in the United States. Evidence suggests that in strong contrast to being a 'success story,' the economic status of many recently arrived Vietnamese refugees is characterized by unstable, minimum-wage employment, welfare dependency and participation in the informal economy. The paper suggests that the group's economic opportunities have been limited by the configuration of circumstances that have surrounded their entry and settlement into the United States as refugees, as well as by the demographic structure of the group."