Real Minimum Wage Research Articles

Effects of the Covid-19 pandemic on labour markets in the western Balkans

Covid-19 has had a significant effect on labour market metrics across the globe. This article aims to contribute to the understanding of the pandemic’s adverse impact on labour markets in the western Balkans and the need to take appropriate measures to mitigate this effectively in the forthcoming period. Using a spread of data, we analyse and compare the distributional impacts of the pandemic recession in western Balkans labour markets in terms of the unemployment rate and the average annual growth in real minimum wages. Our analysis shows a significant deterioration of labour market trends - not least in comparison with the picture of 2019 which was broadly much more positive - which has led to increased government spending on social protection measures. This needs to be continued, not least as regards vulnerable individuals, including young people, as the pandemic continues its track. On the basis of our results, and to deal with the structural challenges presented by Balkans labour markets, there is a need for further reform and updating of regulation, social protection and policies in the labour market.

Spillover Effects from Voluntary Employer Minimum Wages

Low unionization rates, a falling real federal minimum wage, and prevalent non-competes characterize low-wage jobs in the United States and contribute to growing inequality. In recent years, a number of private employers have opted to institute or raise company-wide minimum wages for their employees, sometimes in response to public pressure. To what extent do wage-setting changes at major employers spill over to other employers, and what are the labor market effects of these policies? In this paper, we study recent minimum wages by Amazon, Walmart, Target, and Costco using data from millions of online job ads and employee surveys. We document that these policies induced wage increases at low-wage jobs at other employers. In the case of Amazon, which instituted a $15 minimum wage in October 2018, our estimates imply that a 10% increase in Amazon's advertised hourly wages led to an average increase of 2.6% among other employers in the same commuting zone. Using the CPS, we estimate wage increases in exposed jobs in line with our magnitudes from employee surveys and find that major employer minimum wage policies led to small but precisely estimated declines in employment, with employment elasticities ranging from -.04 to -.13.

Spillover Effects from Voluntary Employer Minimum Wages

Low unionization rates, a falling real federal minimum wage, and outsourcing have hampered wage growth in the low-wage sector in the US. In recent years, a number of private employers have opted to institute or raise company-wide minimum wages for their employees, sometimes in response to public pressure. To what extent do wage-setting changes at major employers spill over to other employers, and what are the broader labor market effects of these policies? In this paper, we study recent minimum wages by Amazon, Walmart, Target, CVS, and Costco using data from millions of online job ads and employee surveys. We document that these policies induced wage increases at low-wage jobs at other employers, where the modal response was to match the wage announced by the large retailer. In the case of Amazon’s $15 minimum wage in October 2018, our estimates imply that a 10% increase in Amazon’s advertised hourly wages led to an average increase of 2.3% among other employers in the same commuting zone. Using the CPS, we estimate wage increases in exposed jobs in line with our magnitudes from employee surveys and find that large employer minimum wage policies led to small but precisely estimated declines in employment, with employment elasticities ranging from -0.04 to -0.13. Large employer minimum wage announcements influenced wages more broadly. The magnitude of these wage spillovers cannot easily be explained by standard competitive pressures, suggesting a role for both market power and norms in wage determination.

Minimum Wages in New Zealand: Policy and Practice in the 21st Century

New Zealand has seen dramatic changes in minimum wage policies since 2000. The adult minimum wage has increased 75% in CPI-adjusted real terms. In addition, the youth minimum wage was abolished in two stages, resulting in a 125% increase in the real minimum wage for 16–19-year-old workers. We review the motivations for minimum wages and the changes and analyse how they have affected workers outcomes. We find that the minimum wage now strongly determines the wages of teenage workers, with the minimum wage now at the median wage of teenagers, and over half of 16–17-year-olds, and about 40% of 18–19-year-olds, earning at or below the minimum.Although we find no clear evidence that increases in the minimum wage have led to adverse employment effects, we expect there are downside risks for youth and low skilled workers' employment. As minimum wage workers are broadly spread across the household income distribution, we conclude that minimum wages are largely ineffective as a redistributive income support policy.

Minimum Wages in New Zealand: Policy and practice in the 21st century

New Zealand has seen dramatic changes in minimum wage policies since 2000. The adult minimum wage has increased 75% in CPI-adjusted real terms. In addition, the youth minimum wage was abolished in two stages, resulting in a 125% increase in the real minimum wage for 16–19-year-old workers. We review the motivations for minimum wages and the changes and analyse how they have affected workers outcomes. We find that the minimum wage now strongly determines the wages of teenage workers, with the minimum wage now at the median wage of teenagers, and over half of 16–17-year-olds, and about 40% of 18–19-year-olds, earning at or below the minimum. Although we find no clear evidence that increases in the minimum wage have led to adverse employment effects, we expect there are downside risks for youth and low skilled workers' employment. As minimum wage workers are broadly spread across the household income distribution, we conclude that minimum wages are largely ineffective as a redistributive income support policy.

Earnings Inequality and the Minimum Wage: Evidence from Brazil

We quantify the effect of a minimum wage on compression throughout the earnings distribution. Using the case of Brazil, which experienced a large decrease in earnings inequality while its real minimum wage increased from 1996-2012, we document that the inequality decrease was bottom-driven yet widespread, with compression up to the 75th earnings percentile. We develop an equilibrium search model with heterogeneous firms and workers and find that effects of the minimum wage are consistent with the above facts, explaining 70 percent of the observed inequality decrease, with half of the decrease due to spillovers further up the earnings distribution.

Minimum wage and restaurant hygiene violations: Evidence from Seattle

We study the association between the minimum wage and food establishment hygiene violations between Seattle (the treated city) and Bellevue (the control city), both cities located in King County and sharing the same health inspection department. An increase in the real minimum wage of $0.25 is associated with an increase of at least 8% in total and less severe (blue) hygiene violation scores for food establishments in Seattle. We find mixed support for the increase in more severe (red) violations. A decline in employment with an increase in minimum wage could be driving the increases in hygiene violations.

The effect of minimum wages on consumption in Canada

We use Canadian data over the period of 1991Q1 to 2019Q2 to examine the effect of higher minimum wages on consumption, measured as the real retail trade sales per adult population. Such an examination is rare in the extant literature and it is timely given the increasing debate concerning the stimulus versus inflationary effects arising from wage polices because of COVID-19 global pandemic. We apply the autoregressive distributed lag model to determine the causal relationship between these variables. We find one long-run cointegrating relationship that runs from the real minimum wage to the real retail trade sales. In addition, we find that a 1% increase in the minimum wage is associated with almost a 0.5% increase in real retail trade sales in the long run. While our findings rest on several statistical assumptions, there is strong evidence in support of the position that minimum wage strengthens aggregate consumer spending, and thereby the standard of living, economic growth and stability. This is a position that differs from the conclusions drawn from mainstream academic and policy debates on the economic usefulness and efficacy of minimum wage increases. JEL Codes: C30, E21, E24

The minimum wage in formal and informal sectors: Evidence from an inflation shock

I estimate the effect of the minimum wage on formal wages, informal wages, and employment in Colombia. I exploit an unexpected increase in the real minimum wage during 1999. My analysis combines unconditional quantile regressions with a differences-in-differences design. I find evidence of wage responses for wages close to the minimum wage. The increases are present in both the informal and formal sectors, and are larger in the formal one. Wages around the minimum increase by around 3 percent in the formal sector for a 10 percentage points larger minimum wage incidence, and by around 1 percent in the informal sector. These increases are smaller than those implied by full compliance to minimum wage policy, but positive for some unaffected workers. This suggests employers partially comply with the minimum wage and use it as a reference. I find slight negative employment effects on the informal sector, but not on the formal sector. The effects in the informal sector are not driven by cross-sectoral effects. The results suggest the minimum wage has a direct impact on the informal labor market, although they may not apply to minimum wage changes in other countries or contexts, or to larger minimum wage increases.

Modern problems of income and labor market distribution under inclusive growth

Introduction. The current state of income distribution and the particularities of the labor market is a key indicator in identifying opportunities for ensuring the country’s economic development and macroeconomic stability as a necessary basis for inclusive growth. In Ukraine, against the backdrop of an unbalanced economy, high unemployment, gender inequality, social stratification and increasing income inequality, the labor market needs to change the development vector, taking into account the demands of inclusive economic growth.Purpose. The purpose of our article is to investigate the state of distribution of population incomes and labor market features through the prism of an inclusive approach to economic growth and to identify basic principles for overcoming labor market imbalances, as well as to explore the key priorities of the Europe 2020 economic growth strategy. Methods. Based on the analysis of scientific-theoretical approaches to the interpretation of the concept of the labor market, income distribution, the essence of inclusive growth and international methods of assessment and calculation of the index of inclusive development, we applied a systematic approach using analytical, monographic, macroeconomic, economic and mathematical methods of studying this problem. Results. Today, in the labor market of Ukraine, there is a balanced demand for labor, which is reflected in a shortage of workers of specialties and excess supply of workers with higher education, and there is still unmet demand for vacancies, one of the reasons for the mismatch of requirements, the offered professions and the level of qualification available in employees. It is confirmed that the vector of inclusive development of the economy of Ukraine will help to overcome imbalances in the labor market, will become one of the factors of balanced development and will increase the standard of living of the population and reduce the income gap. Reducing the income gap as one of the main priorities of inclusive growth should be realized through improving the social policy of the state, ensuring structural transformations in the Ukrainian economy, establishing a real minimum wage and the size of the consumer basket, improving the monitoring of labor market forecasting and education the labor market in skilled labor and the expansion of opportunities for increasing the competitiveness of the workforce through the improvement of educational services. Discussion. The basic principles of inclusive development should be the principles of equal opportunities; the principle of justice for all; the principle of openness; the principle of inclusive solutions; the rule of law; the principle of inclusive democracy; principles of decent work and decent living standards; the principle of entrepreneurial activity for all; the principle of social cohesion; principle of being scientific. The subject of our further research is to identify the infrastructure functions of an inclusive labor market.

The Impact of the Minimum Wage on DI Participation

This report provides an empirical analysis of the impact of the minimum wage on DI claims and awards. It draws on data from the Social Security Administration’s State Agencies Monthly Workload Dataset, from which a state-by-year panel of DI claims and awards is constructed for 2002-2017 and matched to data on the real effective minimum wage, the higher of the federal and state minimum wage in each state and year. Then two reduced-form estimation methodologies are employed. The first follows studies in the hourly wage-inequality literature and models log DI claims as a function of the bindingness of the minimum wage in the state hourly wage distribution. The second follows studies in the minimum wage disemployment literature and models log claims (in both levels and first-differences) as a function of a distributed lag of the minimum wage.

A Comparative Study of Minimum Wage and Employment in China and in the United States

In this paper, we use regression models to analyze and compare the effect of a change in real minimum wage on employment rate both in China (the largest emerging market) and in the United States (the largest developed country). The longitudinal data we use is from 2000 to 2016 published by both countries. After controlling for unobserved heterogeneities by using the fixed effect estimations, the results show a significant and negative correlation between real minimum wage and employment rate in both countries, with a smaller and weaker effect of real minimum wage in China. It indicates that employment in China is less responsive to a change in minimum wage because of its unique economic system. In addition, We find that the effect of minimum wage on employment rate turns into insignificant in recent years in China since 2008, which is the opposite of and different from the situation in the U.S.

Mudança estrutural, preços relativos e distribuição funcional da renda: o caso brasileiro (1995-2009)*

Resumo Este trabalho analisa o papel das transformações da estrutura produtiva sobre a evolução da parcela do trabalho na renda agregada no Brasil no período 1995-2009. Foi realizada uma decomposição estrutural do crescimento da parcela do trabalho, isolando o efeito das alterações na composição setorial da renda real dos efeitos relacionados aos ajustes dos preços relativos e à trajetória do salário médio real em relação à produtividade. As mudanças na composição setorial da renda tiveram um papel relevante para a evolução da participação das rendas do trabalho. Entretanto, essas mudanças se deram principalmente pelas alterações na estrutura de preços relativos mais do que por mudanças na composição real da renda. Por fim, observou-se que estes resultados podem ser associados às mudanças institucionais ocorridas no período, em especial às privatizações na década de 1990 e à política de valorização do salário mínimo real nos anos 2000.

The Role of the Minimum Wage on the Declining Wage Inequality in Latin America: Evidence from Brazil.

Over the past two decades, the downward trend of income inequality in Brazil has been accompanied by a sharp increase in the real value of the minimum wage. There is no empirical consensus on whether the minimum wage has an equalizing effect on income distribution because of its ambiguous effects on employment. I document the effectiveness of the minimum wage on compressing wage inequality throughout the wage distribution and its effects on employment by using Brazilian regional data over the post-inflationary period (1995-2015). A counterfactual exercise shows that half of the decline in lower-tail inequality is attributable to the increase in the real minimum wage whereas the effects of the minimum wage on upper-tail inequality are negligible. Furthermore, the increase in the minimum wage has small contemporaneous adverse effects on formal employment which appear to vanish after three quarters.JEL classification: E24Keywords: wage inequality, employment, minimum wage.

Statisical Analysis Between Government Wage Policy on Minimum Wage Saga in Nigeria

Some methods used to analysis between government wage policy on minimum wage saga in Nigeria were considered. Descriptive Statistics, The Ordinary Least Square technique; Correlation Analysis tools were employed to ascertain the significant difference between government wage policy on minimum wage saga in Nigeria. Data were collected for period 1974 – 2000.Our results shows that year of review is negatively and significant on government wage policy on minimum wage saga in Nigeria. Consumer Price Index is negatively and significant on government wage policy on minimum wage saga in Nigeria. Also, there is a perfect negative association on year of review between real minimum wage on government wage policy on minimum wage saga in Nigeria and it is significant, with a perfect positive association year of review between consumer price index on government wage policy on minimum wage saga in Nigeria and it is significant and there is a negative moderate association on real minimum wage between consumer price index on government wage policy on minimum wage saga in Nigeria and it is significant. This study therefore recommends that government should reduce the cost of governance and improve the living standard of workers by fixing a better wage. Finally, diversifying the Nigeria economy is necessary for states to enhance their internally generated revenue and step into creation of employment opportunities and better pay package.

Statisical Analysis Between Government Wage Policy on Minimum Wage Saga in Nigeria

Some methods used to analysis between government wage policy on minimum wage saga in Nigeria were considered. Descriptive Statistics, The Ordinary Least Square technique; Correlation Analysis tools were employed to ascertain the significant difference between government wage policy on minimum wage saga in Nigeria. Data were collected for period 1974 – 2000.Our results shows that year of review is negatively and significant on government wage policy on minimum wage saga in Nigeria. Consumer Price Index is negatively and significant on government wage policy on minimum wage saga in Nigeria. Also, there is a perfect negative association on year of review between real minimum wage on government wage policy on minimum wage saga in Nigeria and it is significant, with a perfect positive association year of review between consumer price index on government wage policy on minimum wage saga in Nigeria and it is significant and there is a negative moderate association on real minimum wage between consumer price index on government wage policy on minimum wage saga in Nigeria and it is significant. This study therefore recommends that government should reduce the cost of governance and improve the living standard of workers by fixing a better wage. Finally, diversifying the Nigeria economy is necessary for states to enhance their internally generated revenue and step into creation of employment opportunities and better pay package.

DAMPAK UPAH MINIMUM TERHADAP PENYERAPAN TENAGA KERJA SEKTOR FORMAL DAN INFORMAL: ANALISIS SPASIAL

There is possibility of bias in previous study about impact of minimum wages on labor absorption in formal and informal sectors because it has not yet accommodated the spatial effects of inter-regional labor market dependencies. This study aims to examine impact increasing of minimum wage on labor absorption in formal and informal sector without spatial effects then compared with if there are spatial effects. Without spatial effect, the model used is panel model and with spatial effect, model used is Panel Spatial Auto-Regressive model. The dependent variable used is labor absorption in formal sector relative to informal sector, whereas the independent variable is the real minimum wage in the form of the natural logarithm. The result of both models showed that increasing of minimum wage significantly reduced the labor absorption of formal sector relative to informal sector. Coefficient value of the impact increasing of minimum wage produced by the spatial model is greater than the non-spatial model whereas from the model criteria results show better spatial model, so it can be concluded there is underestimate in the previous study which does not take into account the spatial dependencies of the labor market .

Association Between State Minimum Wages and Suicide Rates in the U.S.

The suicide rate in the U.S. has been increasing in recent years. Previous studies have consistently identified financial stress as a contributing factor in suicides. Nevertheless, there has been little research on the effect of economic policies that can alleviate financial stress on suicide rates. The purpose of this study is to determine whether increases in state minimum wages have been associated with changes in state suicide rates. A retrospective panel data study was conducted. In 2018, linear regression models with state fixed effects were used to estimate the relationship between changes in state minimum wages and suicide rates for all 50U.S. states between 2006 and 2016. Models controlled for time-varying state characteristics that could be associated with changes in minimum wages and suicide rates. There were approximately 432,000 deaths by suicide in the study period. A one-dollar increase in the real minimum wage was associated on average with a 1.9% decrease in the annual state suicide rate in adjusted analyses. This negative association was most consistent in years since 2011. An annual decrease of 1.9% in the suicide rate during the study period would have resulted in roughly 8,000 fewer deaths by suicide. Analyses by race and sex did not reveal substantial variation in the association between minimum wages and suicides. Increases in real minimum wages have been associated with slower growth in state suicide rates in recent years. Increasing the minimum wage could represent a strategy for addressing increases in suicide rates.

Income Inequality, Ethnic Diversity, and State Minimum Wages

ObjectivesThe objective of the current study is to examine the determinants of wage floors set by state governments in the United States, with a particular focus on the effects of income inequality and ethnic diversity.MethodWe estimate the effects of income inequality, ethnic diversity, and their interaction on real state minimum wages using a state‐level panel of Census demographic data from 1981 to 2010. We also control for state‐level demographics and additional state‐level information, such as measures of voter and government liberalism, along with time and state fixed effects.ResultsWe find that the impact of income inequality is mediated by ethnic diversity. When states are highly ethnically homogeneous, increases in income inequality are associated with higher state minimum wages. When states are highly ethnically heterogeneous, increases in income inequality are associated with lower state minimum wages. The impact of income inequality lacks statistical significance when levels of ethnic diversity are either average or somewhat below average.ConclusionsOverall, our results suggest that the negative impact on state minimum wages in heterogeneous states could stem from rising income inequality, which increases the social distance between whites and other ethnic groups and weakens mass support for wage policies that are believed by the public to be beneficial to the poor.

Aggregate effects of minimum wage regulation at the zero lower bound

The Fair Minimum Wage Act of 2007 increased the U.S. nominal minimum wage by 41%, just as interest rates hit the zero lower bound. I study the interaction of these events in a parsimonious extension of the sticky-price New Keynesian model with heterogeneous labor. A “minimum-wage augmented” Phillips Curve relates inflation to output and the real minimum wage, which I estimate with aggregate data. Consistent with theory, controlling for the real minimum wage reduces the effect of output on inflation and increasing the minimum wage is inflationary. I then calibrate the equilibrium model to match microeconomic elasticities of earnings with respect to the minimum wage. On aggregate, the ZLB’s contractionary effects are dampened because nominal wages cannot decline rapidly, thereby halting the deflationary spiral caused by low aggregate demand. The effect can be large - in the calibrated economy, GDP losses from the ZLB are cut by half, even though only 3% of earnings accrue to minimum wage earners. Furthermore, increasing the minimum wage at the ZLB is expansionary, generating expected accumulated output gains of 14%.