We use policy discontinuities at state borders to identify the effects of minimum wages on earnings and employment in restaurants and other low-wage sectors. Our approach generalizes the case study method by considering all local differences in minimum wage policies between 1990 and 2006. We compare all contiguous county pairs in the United States that straddle a state border and find no adverse employment effects. We show that traditional approaches that do not account for local economic conditions tend to produce spurious negative effects due to spatial heterogeneities in employment trends that are unrelated to minimum wage policies. Our findings are robust to allowing for long-term effects of minimum wage changes.

/pdf/minimum-wage-effects-across-state-borders-estimates-using-2q9jkegquz.pdf

Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties

We estimate the eect of minimum wages on low-wage jobs using 138 prominent state-level
minimum wage changes between 1979 and 2016 in the U.S using a dierence-in-dierences approach.
We first estimate the eect of the minimum wage increase on employment changes by wage bins
throughout the hourly wage distribution. We then focus on the bottom part of the wage distribution
and compare the number of excess jobs paying at or slightly above the new minimum wage to the
missing jobs paying below it to infer the employment eect. We find that the overall number of
low-wage jobs remained essentially unchanged over the five years following the increase. At the
same time, the direct eect of the minimum wage on average earnings was amplified by modest
wage spillovers at the bottom of the wage distribution. Our estimates by detailed demographic
groups show that the lack of job loss is not explained by labor-labor substitution at the bottom of
the wage distribution. We also find no evidence of disemployment when we consider higher levels of
minimum wages. However, we do find some evidence of reduced employment in tradable sectors.
We also show how decomposing the overall employment eect by wage bins allows a transparent
way of assessing the plausibility of estimates.

/pdf/the-effect-of-minimum-wages-on-low-wage-jobs-289vllp1vj.pdf

The Effect of Minimum Wages on Low-Wage Jobs

We revisit the minimum wage-employment debate, which is as old as the Department of Labor. In particular, we assess new studies claiming that the standard panel data approach used in much of the "new minimum wage research" is flawed because it fails to account for spatial heterogeneity. These new studies use research designs intended to control for this heterogeneity and conclude that minimum wages in the United States have not reduced employment. We explore the ability of these research designs to isolate reliable identifying information and test the untested assumptions in this new research about the construction of better control groups. Our evidence points to serious problems with these research designs. We conclude that the evidence still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others, and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage.

https://papers.ssrn.com/sol3/Delivery.cfm/dp7166.pdf?abstractid=2210826&mirid=1&type=2

Revisiting the Minimum Wage-Employment Debate: Throwing Out the Baby with the Bathwater?

We revisit the minimum wage-employment debate, which is as old as the Department of Labor. In particular, we assess new studies claiming that the standard panel data approach used in much of the “new minimum wage research” is flawed because it fails to account for spatial heterogeneity. These new studies use research designs intended to control for this heterogeneity and conclude that minimum wages in the United States have not reduced employment. We explore the ability of these research designs to isolate reliable identifying information and test the untested assumptions in this new research about the construction of better control groups. Our evidence points to serious problems with these research designs. We conclude that the evidence still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others, and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage.

/pdf/revisiting-the-minimum-wage-employment-debate-throwing-out-2j4556yl9q.pdf

Revisiting the Minimum Wage—Employment Debate: Throwing Out the Baby with the Bathwater?:

The employment effect of the minimum wage is one of the most studied topics in all of economics. This report examines the most recent wave of this research – roughly since 2000 – to determine the best current estimates of the impact of increases in the minimum wage on the employment prospects of low-wage workers. The weight of that evidence points to little or no employment response to modest increases in the minimum wage.

/pdf/why-does-the-minimum-wage-have-no-discernible-effect-on-1u7r0ilhyh.pdf

Why Does the Minimum Wage Have No Discernible Effect on Employment

The economic impact of the 2007-2009 increases in the federal minimum wage (MW) is analyzed using a sample of quick-service restaurants in Georgia and Alabama. Store-level bi-weekly payroll records for individual employees are used, allowing us to precisely measure the MW compliance cost for each restaurant. We examine a broad range of adjustment channels in addition to employment, including hours, prices, turnover, training, performance standards, and non-labor costs. Exploiting variation in the cost impact of the MW across restaurants, we find no significant effect of the MW increases on employment or hours over the three years. Cost increases were instead absorbed through other channels of adjustment, including higher prices, lower profit margins, wage compression, reduced turnover, and higher performance standards. These findings are compared with MW predictions from competitive, monopsony, and institutional/behavioral models; the latter appears to fit best in the short run.

/pdf/minimum-wage-channels-of-adjustment-j8c2dqmka8.pdf

Minimum Wage Channels of Adjustment

We analyze the effects of minimum wage increases in 2007–2009 using a sample of restaurants from Georgia and Alabama. Store-level payroll records provide precise measures of compliance costs. We examine multiple adjustment channels. Exploiting variation in compliance costs across restaurants, we find employment and hours responses to be variable and in most cases statistically insignificant. Channels of adjustment to wage increases and to changes in nonlabor costs include prices, profits, wage compression, turnover, and performance standards.

/pdf/minimum-wage-channels-of-adjustment-2fcq150wr3.pdf

Minimum wage channels of adjustment

The economic impact of the 2007-2009 increases in the federal minimum wage (MW) is analyzed using a sample of quick-service restaurants in Georgia and Alabama. Store-level biweekly payroll records for individual employees are used, allowing us to precisely measure the MW compliance cost for each restaurant. We examine a broad range of adjustment channels in addition to employment, including hours, prices, turnover, training, performance standards, and non-labor costs. Exploiting variation in the cost impact of the MW across restaurants, we find no significant effect of the MW increases on employment or hours over the three years. Cost increases were instead absorbed through other channels of adjustment, including higher prices, lower profit margins, wage compression, reduced turnover, and higher performance standards. These findings are compared with MW predictions from competitive, monopsony, and institutional/behavioral models; the latter appears to fit best in the short run.

Tetyana Zelenska

Papers

Minimum Wage Channels of Adjustment

Minimum wage channels of adjustment

Minimum Wage Channels of Adjustment