What does the scholarly research say about whether raising the minimum wage negatively impacts employment?

Below are 23 studies showing a minimal impact of the minimum wage on employment. Click here to jump to 8 studies showing a mixed or inconclusive impact of the minimum wage on employment. Click here to jump to 19 studies showing a negative impact.

Click on any thumbnail to view its abstract; click below each thumbnail to visit the source website.

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Addison, J. T., Blackburn, M. L., & Cotti, C. D. (2009). Do minimum wages raise employment? Evidence from the U.S. retail-trade sector. Labour Economics, 16(4), 397–408.

This paper examines the impact of minimum wages on earnings and employment in selected branches of the retail-trade sector, 1990–2005, using county-level data on employment and a panel regression framework that allows for county-specific trends in sectoral outcomes. We focus on specific subsectors within retail trade that are identified as particularly low-wage. We find little evidence of disemployment effects once we allow for geographic-specific trends. Indeed, in many sectors the evidence points to modest (but robust) positive employment effects.

Addison, J.T., Blackburn, M.L. & Cotti, C.D. (2015). On the robustness of minimum wage effects: Geographically-disparate trends and job growth equations. IZA Journal of Labor Economics 4(24).

Recent attempts to incorporate spatial heterogeneity in minimum-wage employment models have been targeted for using overly simplistic trend controls and for neglecting the potential impact of wage minima on employment growth. This paper investigates whether such considerations call into question findings of statistically insignificant employment effects reported in the literature for an archetypal low-wage sector in the United States: restaurants and bars. Understanding this relationship goes to the heart of the policy debate surrounding minimum wages and, hence, is critical to investigate carefully. Our results conclude that a focus on employment levels is appropriate for this sector and, further, that the deployment of nonlinear trend controls does not dislodge prior research which finds weak support for the existence of adverse minimum-wage employment effects on employment.

Addison, J. T., Blackburn, M. L., & Cotti, C. D. (2012). The effect of minimum wages on labour market outcomes: County-level estimates from the restaurant-and-bar sector. British Journal of Industrial Relations, 50(3), 412–435.

We use US county‐level data on employment and earnings in the restaurant‐and‐bar sector to evaluate the impact of minimum‐wage changes in low‐wage labour markets. Our estimated models are consistent with a simple competitive model in which supply‐and‐demand factors affect both the equilibrium outcome and the probability of the minimum wage being binding. Our evidence does not suggest that minimum wages reduce employment once controls for trends in county‐level sectoral employment are incorporated. Rather, employment appears to exhibit an independent downward trend in states that have increased their minimum wages relative to states that have not, thereby predisposing estimates towards reporting negative outcomes.

Allegretto, S.A., Dube, A. & Reich, M. (2011). Do minimum wages really reduce teen employment? Accounting for heterogeneity and selectivity in state panel data. Industrial Relations: A Journal of Economy and Society, 50(2), 205–240.

Traditional estimates that often find minimum wage disemployment effects include controls for state unemployment rates and state‐ and year‐fixed effects. Using CPS data on teens for the period 1990–2009, we show that such estimates fail to account for heterogeneous employment patterns that are correlated with selectivity among states with minimum wages. As a result, the estimates are often biased and not robust to the source of identifying variation. Including controls for long‐term growth differences among states and for heterogeneous economic shocks renders the employment and hours elasticities indistinguishable from zero and rules out any but very small disemployment effects. Dynamic evidence further shows the nature of bias in traditional estimates, and it also rules out all but very small negative long‐run effects. In addition, we do not find evidence that employment effects vary in different parts of the business cycle. We also consider predictable versus unpredictable changes in the minimum wage by looking at the effects of state indexation of the minimum wage.

Allegretto, S., Dube, A., Reich, M., & Zipperer, B. (2017). Credible research designs for minimum wage studies: A response to Neumark, Salas, and Wascher. ILR Review, 70(3), 559–592.

The authors assess the critique by Neumark, Salas, and Wascher (2014) of minimum wage studies that found small effects on teen employment. Data from 1979 to 2014 contradict NSW; the authors show that the disemployment suggested by a model assuming parallel trends across U.S. states mostly reflects differential pre-existing trends. A data-driven LASSO procedure that optimally corrects for state trends produces a small employment elasticity (–0.01). Even a highly sparse model rules out substantial disemployment effects, contrary to NSW’s claim that the authors discard too much information. Synthetic controls do place more weight on nearby states—confirming the value of regional controls—and generate an elasticity of −0.04. A similar elasticity (−0.06) obtains from a design comparing contiguous border counties, which the authors show to be good controls. NSW’s preferred matching estimates mix treatment and control units, obtain poor matches, and find the highest employment declines where the relative minimum wage falls. These findings refute NSW’s key claims.

Allegretto, S., & Reich, M. (2018). Are local minimum wages absorbed by price increases? Estimates from internet-based restaurant menus. ILR Review, 71(1), 35–63.

The authors analyze 884 Internet-based restaurant menus from inside and outside San Jose, California, which they collected before and after the city implemented a 25% minimum wage increase in 2013. Their findings suggest that nearly all of the cost increase was passed through to consumers, as prices rose 1.45% on average. Minimum wage price elasticities averaged 0.058 for all restaurants and ranged from 0.044 to 0.109, depending on the type of restaurant. The authors’ estimate of payroll cost increases net of turnover savings is consistent with these findings. Equally important, border effects for restaurants are smaller than is often conjectured. Price differences among restaurants that are one-half mile from either side of the policy border are not competed away, indicating that restaurant demand is spatially inelastic. These results imply that citywide minimum wage policies need not result in substantive negative employment effects nor shifts of economic activity to nearby areas.

Belman, D. L., & Wolfson, P. (2010). The effect of legislated minimum wage increases on employment and hours: A dynamic analysis. LABOUR, 24(1), 1–25.

We present a dynamic policy simulation analysing what would have happened to wages, employment, and total hours had the federal minimum wage increased in September 1998, a year after the last actual increase in our data. Prior work suggests that employment responses take 6 years to play out. Using a time‐series model for 23 low‐wage industries, we find a positive response of average wages over 54 months following an increase in the minimum wage, but neither employment nor hours can be distinguished from random noise. Ignoring confidence intervals, the adjustment of hours is complete after 1 year, the adjustment of employment after no more than two and one half years.

Cengiz, D., Dube, A., Lindner, A., & Zipperer, B. (2019). The effect of minimum wages on low-wage jobs. The Quarterly Journal of Economics, 134(3), 1405–1454.

We estimate the effect of minimum wages on low-wage jobs using 138 prominent state-level minimum wage changes between 1979 and 2016 in the United States using a difference-in-differences approach. We first estimate the effect 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 effect. 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 effect 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 tradeable sectors. We also show how decomposing the overall employment effect by wage bins allows a transparent way of assessing the plausibility of estimates.

Dube, A., Lester, T. W., & Reich, M. (2010). Minimum wage effects across state borders: Estimates using contiguous counties. Review of Economics and Statistics, 92(4), 945–964.

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.

Dube, A., Lester, T. W., & Reich, M. (2016). Minimum wage shocks, employment flows, and labor market F\frictions. Journal of Labor Economics, 34(3), 663–704.

We provide the first estimates of the effects of minimum wages on employment flows in the US labor market, identifying the impact by using policy discontinuities at state borders. We find that minimum wages have a sizable negative effect on employment flows but not on stocks. Separations and accessions fall among affected workers, especially those with low tenure. We do not find changes in the duration of nonemployment for separations or hires. This evidence is consistent with search models with endogenous separations.

Dube, A., Naidu, S., & Reich, M. (2007). The economic effects of a citywide minimum wage. ILR Review, 60(4), 522–543.

This paper presents the first study of the economic effects of a citywide minimum wage—San Francisco’s adoption of an indexed minimum wage, set at $8.50 in 2004 and $9.14 by 2007. Compared to earlier benchmark studies by Card and Krueger and by Neumark and Wascher, this study surveys table-service as well as fast-food restaurants, includes more control groups, and collects data for more outcomes. The authors find that the policy increased worker pay and compressed wage inequality, but did not create any detectable employment loss among affected restaurants. The authors also find smaller amounts of measurement error than characterized the earlier studies, and so they can reject previous negative employment estimates with greater confidence. Fast-food and table-service restaurants responded differently to the policy, with a small price increase and substantial increases in job tenure and in the proportion of full-time workers among fast-food restaurants, but not among table-service restaurants.

Giuliano, L. (2013). Minimum wage effects on employment, substitution, and the teenage labor supply: Evidence from personnel data. Journal of Labor Economics, 31(1), 155–194.

Using personnel data from a large US retail firm, I examine the firm’s response to the 1996 federal minimum wage increase. Compulsory increases in average wages had negative but statistically insignificant effects on overall employment. However, increases in the relative wages of teenagers led to significant increases in the relative employment of teenagers, especially younger and more affluent teenagers. Further analysis suggests a pattern consistent with noncompetitive models. Where the legislation affected mainly the wages of teenagers and so was only moderately binding, it led both to higher teenage labor market participation and to higher absolute employment of teenagers.

Hirsch, B. T., Kaufman, B. E., & Zelenska, T. (2015). Minimum wage channels of adjustment. Industrial Relations: A Journal of Economy and Society, 54(2), 199–239.

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.

Hoffman, Saul D. (2014). Employment effects of the 2009 minimum wage increase: New evidence from state-based comparisons of workers by skill level. The B.E. Journal of Economic Analysis & Policy, 14(3), 695–721.

In July, 2009, when the US Federal minimum wage was increased from $6.55 to $7.25, individuals in nearly one-third of all states were unaffected, since the state minimum wage already exceeded $7.25. We use this variation to make comparisons of the employment of low-skill workers with their peers across states and with workers within states who were arguably unaffected by the increase, using DID and DIDID methods. Our data come from the 2009 Current Population Survey, 4 and 5 months before and after the increase. We find little evidence of negative employment effects for teens or less-educated adults. Further control for demographic characteristics and state fixed effects have relatively small effects on the size and significance of estimated effects.

Hoffman, S. D. (2016). Are the effects of minimum wage increases always small? A reanalysis of Sabia, Burkhauser, and Hansen. ILR Review, 69(2), 295–311.

In a 2012 article, Sabia, Burkhauser, and Hansen reported very large negative effects of the 2004 to 2006 increase in the New York State minimum wage on the employment of young, less-educated workers. Hoffman reexamines their estimates using data from the full Current Population Survey (CPS), rather than the smaller CPS-MORG files they used, and finds no evidence of a negative employment impact. The full CPS, which is the source of U.S. official labor market statistics, is certainly the more appropriate and reliable data source. Furthermore, when Hoffman repeats the analysis using three states and the District of Columbia, which also had a substantial increase in the state minimum wage in the same time period, he finds evidence of a small positive employment effect. Together, the two findings are consistent with other, more recent research that reports very weak or zero employment effects of the minimum wage.

Liu, S., Hyclak, T. J., & Regmi, K. (2015). Impact of the minimum wage on youth labor markets. LABOUR, 30(1), 18–37.

We study the effect of the minimum wage on labor market outcomes for young workers using US county‐level panel data from the first quarter of 2000 to the first quarter of 2009. We go beyond the usual estimates of earnings and employment effects to consider how differences across states in the minimum wage affect worker turnover via separations and accessions and job turnover through new job creation and job losses. We find that a higher minimum wage level is associated with higher earnings, lower employment and reduced worker turnover for those in the 14–18 age group. For workers aged 19–21 and 22–24, we find less consistent evidence of minimum wage effects on earnings and employment. But, even for these age groups, a higher minimum wage is found to reduce accessions, separations and the turnover rate.

Orrenius, P. M., & Zavodny, M. (2008). The effect of minimum wages on immigrants’ employment and earnings. ILR Review, 61(4), 544–563.

This study examines how minimum wage laws affect the employment and earnings of low-skilled immigrants and natives in the United States. Minimum wage increases might have larger effects among low-skilled immigrants than among natives because, on average, immigrants earn less than natives due to lower levels of education, limited English skills, and less social capital. Results based on data from the Current Population Survey for the years 1994-2005 do not indicate that minimum wages had adverse employment effects among adult immigrants or natives who did not complete high school. However, low-skilled immigrants may have been discouraged from settling in states that set wage floors substantially above the federal minimum.

Persky, J.J., & Baiman, R. (2010). Do state minimum wage laws reduce employment? Mixed Messages from fast food outlets in Illinois and Indiana. Journal of Regional Analysis and Policy, 40(2), 1-11.

In January 2004 and January 2005 the state of Illinois increased its minimum wage to $5.50 and then $6.50, well above the national minimum of $5.15. This study, comparing the impacts on Illinois fast food outlets to a control group of Indiana outlets, was conceived as a repetition of the Card-Krueger study of a similar situation in New Jersey. The central question is whether the Illinois outlets demonstrated a substantial reduction in employment in response to the higher legislated wage rates. We conclude that the Illinois-Indiana data lack the power to differentiate between a “zero employment effect” and a “small negative employ-ment effect.” Furthermore, we question the welfare significance of such a determination even if it could be convincingly made.

Pollin, R., & Wicks-Lim, J. (2016). A $15 U.S. minimum wage: How the fast-food industry could adjust without shedding jobs. Journal of Economic Issues, 50(3), 716–744.

We consider the extent to which U.S. fast-food businesses could adjust to an increase in the federal minimum wage from its current level of $7.25 an hour to $15 an hour without having to resort to reducing their workforce. We consider this issue through a set of simple illustrative exercises, whereby the US raises the federal minimum wage in two steps over four years, first to $10.50 within one year, then to $15 after three more years. We conclude that the fast-food industry could absorb the increase in its overall wage bill without resorting to cuts in their employment levels at any point over this four-year adjustment period. We find that the fast-food industry could fully absorb these wage bill increases through a combination of turnover reductions, trend increases in sales growth, and modest annual price increases over the four-year period. Working from the relevant existing literature, our results are based on a set of reasonable assumptions on fast-food turnover rates, the price elasticity of demand within the fast-food industry, and the industry’s underlying trend for sales growth. We also show that fast-food firms would not need to lower their average profit rate during this adjustment period.

Powers, E. T. (2009). The impact of minimum-wage increases: Evidence from fast-food establishments in Illinois and Indiana. Journal of Labor Research, 30(4), 365–394.

Fast-food establishments in Illinois and Indiana were surveyed during a period of state-mandated minimum-wage increases in Illinois. While entry-level wages of Illinois establishments rose substantially in response to the mandated increases, there is little evidence that Illinois establishments ameliorated wage increases by delaying scheduled raises or reducing fringe benefit offerings. There is little evidence of ‘labor-labor’ substitution in favor of women, better educated, or teenaged workers, or increased worker tenure at the new wage, but weak evidence of increased food prices. In contrast, there are large declines in part-time positions and workers’ hours in Illinois relative to Indiana. Aggregate figures from the Bureau of Labor Statistics support relative declines in total fast-food employment in ‘downstate’ Illinois counties, as hypothesized. However, establishments’ responses do not appear proportionate to the strength of the minimum wage change.

Šauer, R. (2018). The macroeconomics of the minimum wage. Journal of Macroeconomics, 56, 89–112.

This paper studies the macroeconomic impact of a statutory minimum wage. I demonstrate by means of a medium-scale DSGE model, which I estimate with US data, how the minimum wage impacts aggregate variables. The model framework enables me to take into account various general-equilibrium effects that the minimum wage can potentially trigger. Under the estimated stance of monetary policy, the model predicts that the minimum wage has a negligible effect on the macroeconomy. However, if the Federal Reserve conducted highly dovish monetary policy, the federal minimum wage would substantially affect the macroeconomy. A minimum-wage hike would even cause an economic expansion. The paper also examines the possibility of indexing the minimum wage to an inflation measure. It compares the indexation to price inflation with the indexation to wage inflation. By considering an alternative estimated model, I present evidence that performance standards are an important adjustment channel through which firms react to changes in the minimum wage.

Schmitt, J. (2015). Explaining the small employment effects of the minimum wage in the United States. Industrial Relations: A Journal of Economy and Society, 54(4), 547–581.

This paper reviews the most recent wave of research—roughly since 2000—on the employment effects of the U.S. minimum wage and concludes that the weight of evidence points to little or no employment response to modest increases. The paper then examines eleven possible adjustments to minimum‐wage increases that may explain why the measured employment effects are consistently small. Given the relatively low cost to employers of modest increases in the minimum wage, these adjustment mechanisms appear to be sufficient to avoid employment losses, even for employers with a large share of low‐wage workers.

Totty, E. (2017). The effect of minimum wages on employment: A factor model approach. Economic Inquiry, 55(4), 1712–1737.

This paper uses factor model methods to resolve issues in the minimum wage‐employment debate. Factor model methods provide a more flexible way of addressing concerns related to unobserved heterogeneity that are robust to critiques from either side of the debate. The factor model estimators produce minimum wage‐employment elasticity estimates that are much smaller than the traditional ordinary least squares (OLS ) results and are not statistically different from zero. These results hold for many specifications and datasets from the minimum wage‐employment literature. A simulation shows that unobserved common factors can explain the different estimates seen across methodologies in the literature.

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Below are 8 studies showing a mixed or inconclusive impact of the minimum wage on employment. Click here to jump to 23 studies showing a minimal impact of the minimum wage on employment. Click here to jump to 19 studies showing a negative impact.

Click on any thumbnail to view its abstract; click below each thumbnail to visit the source website.

Aaronson, D., French, E., Sorkin, I., & To, T. (2018). Industry dynamics and the minimum wage: A Putty-Clay approach. International Economic Review, 59(1), 51–84.

We document two new findings about the industry‐level response to minimum wage hikes. First, restaurant exit and entry both rise following a hike. Second, there is no change in employment among continuing restaurants. We develop a model of industry dynamics based on putty‐clay technology that is consistent with these findings. In the model, continuing restaurants cannot change employment, and thus industry‐level adjustment occurs gradually through exit of labor‐intensive restaurants and entry of capital‐intensive restaurants. Interestingly, the putty‐clay model matches the small estimated short‐run disemployment effect of the minimum wage found in other studies, but produces a larger long‐run disemployment effect.

Addison, J. T., Blackburn, M. L., & Cotti, C. D. (2013). Minimum wage increases in a recessionary environment. Labour Economics, 23, 30–39.

Do seemingly large minimum-wage increases in an environment of deep recession produce clearer evidence of disemployment than is often observed in the modern minimum wage literature? This paper uses three data sets to examine the employment effects of the most recent increases in the U.S. minimum wage. We focus on two high-risk groups – restaurant-and-bar employees and teenagers – for the years 2005–2010. Although the evidence for a general disemployment effect is not uniform, estimates do suggest the presence of a negative minimum wage effect in states hardest hit by the recession.

Bazen, Stephen. (2005). Do minimum wages have a negative impact on employment in the United States? Économie publique, 17(2), 41-58.

The study by David Card and Alan Krueger of the effect of a rise minimum wage in New Jersey fast-food restaurants (and their subsequent book) had marked impact on the economics profession. They found that the increase in the minimum wage actually increased employment. However, the ‘new economics of the minimum wage’ is based on a wider body of evidence than the New Jersey study. In their book, Card and Krueger re-examine earlier studies and present evidence supporting the claim that during the 1980s and early 1990s, minimum wage hikes had no significant negative employment effects in the United States. There have been a number of attempts to examine the robustness of their results and this research has been centred on the following three issues: (a) the validity of the New Jersey study, (b) the apparent absence of effects of federal minimum wage hikes using time series data and (c) the analysis of state and federal minimum wage increases on state employment levels. Based on this evidence it would appear that during the 1980s and 1990s that federal minimum wage increases did have a negative impact on teenage employment while state level increases, such as the one in New Jersey, by and large did not. This suggests that their results do not generalise to the point where it is possible to conclude that there is no negative effect of minimum wages on employment in the United States.

Bazen, S., & Le Gallo, J. (2009). The state–federal dichotomy in the effects of minimum wages on teenage employment in the United States. Economics Letters, 105(3), 267–269.

For the period 1984–1997, we find that state-level minimum wage hikes had no negative employment impact whereas federal hikes did. This dichotomy may account for the differences between the results of the ‘new economics of the minimum wage’ and time series studies.

Gittings, R. K., & Schmutte, I. M. (2016). Getting Handcuffs on an Octopus: Minimum wages, employment, and turnover. ILR Review, 69(5), 1133–1170.

Theoretical work on minimum wage policy emphasizes labor market dynamics, but the resulting implications for worker mobility remain largely untested. The authors show that in the teenage labor market, higher minimum wage standards reduce worker flows and increase job stability. Furthermore, they find that the employment effects of a relatively higher minimum wage vary considerably across markets with different levels of turnover and labor market tightness. Results help to explain the small effects of minimum wage standards on employment commonly found in the aggregate data and are consistent with labor market models that involve search frictions.

Ropponen, O. (2011). Reconciling the evidence of Card and Krueger (1994) and Neumark and Wascher (2000). Journal of Applied Econometrics, 26(6), 1051–1057.

We employ the original Card and Krueger (American Economic Review 1994; 84: 772–793) and Neumark and Wascher (American Economic Review 2000; 90: 1362–1396) data together with the changes‐in‐changes estimator to re‐examine the evidence for the effect of minimum wages on employment. Our study reconciles the controversial positive average employment effect reported by the former study and the negative average employment effect reported by the latter study. Our main finding, which is supported by both datasets, is that the controversial result remains valid only for small fast‐food restaurants.

Singell, L.D., & Terborg, J.R. (2007). Employment effects of two Northwest minimum wage initiatives. Economic Inquiry, 45(1), 40–55.

This article exploits a natural experiment initiated by Oregon and Washington voter referendums to show that the minimum wage is a blunt instrument that differentially affects low‐wage workers within and across industries. Specifically, employment growth specifications indicate that the minimum wage generates consistently negative employment effects for eating and drinking workers where the minimum is shown to be relatively binding, but not for hotel and lodging workers where the minimum is less binding. Regressions using job‐specific want‐ad data from Portland and Seattle newspapers also indicate a reduction in hiring solicitation relating to the extent that the minimum wage binds.

Thompson, J. P. (2009). Using local labor market data to re-examine the employment effects of the minimum wage. ILR Review, 62(3), 343–366.

Using quarterly Census data for 1996–2000, the author evaluates how minimum wages affected teenage employment at the county level. An analysis that includes all counties yields small and statistically insignificant effects, consistent with previous research using state panels. However, in counties where the minimum wage was likely binding (above the market-clearing wage for teens), the negative impact on employment was considerably larger. The effect was strongest in small counties, was restricted to “transitory” jobs and new hires, and apparently was not experienced by young adults ages 19–22. The small employment effects found in much of the literature, the author argues, at least partly reflect the estimates’ inclusion of local labor markets where the minimum wage is not binding. By averaging the effects across all areas, with no disaggregation based on where the minimum wage is binding and where it is not, these studies overlook important regional variation.

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Below are 19 studies showing a negative impact of the minimum wage on employment. Click here to jump to 23 studies showing a minimal impact of the minimum wage on employment. Click here to jump to 8 studies showing a mixed or inconclusive impact.

Click on any thumbnail to view its abstract; click below each thumbnail to visit the source website.

Aaronson, D., & French, E. (2007). Product market evidence on the employment effects of the minimum wage. Journal of Labor Economics, 25(1), 167–200.

We infer the employment response to a minimum wage change by calibrating a model of employment for the restaurant industry. Whereas perfect competition implies that employment falls and prices rise after a minimum wage increase, the monopsony model potentially implies the opposite. We show that estimated price responses are consistent with the competitive model. We place fairly tight bounds on the employment response, with the most plausible parameter values suggesting that a 10% increase in the minimum wage lowers low‐skill employment by 2%–4% and total restaurant employment by 1%–3%.

Addison, J. T., Blackburn, M. L., & Cotti, C. D. (2012). The effect of minimum wages on labour market outcomes: County-level estimates from the restaurant-and-bar sector. British Journal of Industrial Relations, 50(3), 412–435.

We use US county‐level data on employment and earnings in the restaurant‐and‐bar sector to evaluate the impact of minimum‐wage changes in low‐wage labour markets. Our estimated models are consistent with a simple competitive model in which supply‐and‐demand factors affect both the equilibrium outcome and the probability of the minimum wage being binding. Our evidence does not suggest that minimum wages reduce employment once controls for trends in county‐level sectoral employment are incorporated. Rather, employment appears to exhibit an independent downward trend in states that have increased their minimum wages relative to states that have not, thereby predisposing estimates towards reporting negative outcomes.

Clark, K., Kaas, L., & Madden, P. (2006). Minimum wage increases can lead to wage reductions by imperfectly competitive firms. Economics Letters, 91(2), 287–292.

In a model with imperfect competition and multiple equilibria we show how an increase in the minimum wage can lead firms to reduce wages (and employment). We find some empirical support for this in the Card–Krueger minimum wage data.

Clemens, J., & Strain, M. R. (2018). The short-run employment effects of recent minimum wage changes: Evidence from the American Community Survey. Contemporary Economic Policy, 36(4), 711–722.

This paper presents early evidence on the employment effects of state minimum wage increases enacted between January 2013 and January 2015. As of 2015, we estimate that relatively large minimum wage increases (defined as those exceeding $1) reduced employment among low‐skilled population groups by just over 1 percentage point. Smaller minimum wage increases, as well as increases linked to inflation indexation provisions, appear to have had much smaller (and possibly positive) effects on employment over our sample period. The estimates thus raise the potential importance of nonlinearities in the minimum wage’s effects, which are consistent with standard models of the labor market.

Gorry, A., & Jackson, J. J. (2016). A note on the nonlinear effect of minimum wage increases. Contemporary Economic Policy, 35(1), 53–61.

We use a labor search model with worker experience to assess the effects of minimum wage increases. Minimum wages can have nonlinear effects on unemployment as higher minimum wages become binding for larger portions of the underlying productivity distribution. The model is used to assess the increases proposed by the Obama Administration from $7.25 an hour to $9.00 and then to $10.10 per hour. We find that minimum wage increases have large effects on youth unemployment. These large effects cast doubt on using past empirical estimates of the effects of minimum wages that do not account for potential nonlinearities.

Hanson, A., & Hawley, Z. (2014). The $10.10 minimum wage proposal: An evaluation across States. Journal of Labor Research, 35(4), 323–345.

This paper offers state-level estimates of job loss from increasing the federal minimum wage to $10.10 per hour in 2016. Given the vast differences in nominal wages across geography, a federal increase in minimum wage that is not indexed to local wage levels will have a differential impacts across states. The proposed minimum wage would be binding for between 17 and 18 % of workers nationally. We estimate coverage rates ranging from just 4 % in Washington D.C. to as high as 51 % in Puerto Rico, with 13 states having at least 20 % of the employed population covered by the proposal. Using labor demand elasticities from previous empirical work, these coverage rates imply national employment losses between 550,000 and 1.5 million workers. The range of state estimates shows that states are differentially impacted, with high-end loss estimates ranging between 2.8 % of covered employees in Arkansas to over 41 % in Puerto Rico. Sensitivity analysis highlights that using even a simple methodology with relatively few assumptions for estimating employment loss from minimum wage changes is subject to a high degree of uncertainty.

Hoffman, S. D., & Trace, D. M. (2009). NJ and PA once again: What happened to employment when the PA–NJ minimum wage differential disappeared? Eastern Economic Journal, 35(1), 115–128.

Card and Krueger’s analysis of the impact of the 1992 increase in the New Jersey (NJ) state minimum wage on employment in fast-food restaurants in NJ and Pennsylvania (PA) is very well known. In 1996 and 1997, the federal minimum wage was increased from $4.25 to $5.15, thereby increasing the minimum wage by $0.90 in PA but by just $0.10 in NJ. We use CPS data to examine the impacts of this increase on employment of likely minimum wage workers in the two states, using DID and DIDID estimators that exploit within-state and between-state comparisons. We find consistent evidence that employment of “at-risk” groups was negatively affected in PA relative to other groups in PA and to comparable groups in NJ.

Kalenkoski, C. M., & Lacombe, D. J. (2008). Effects of minimum wages on youth employment: the importance of accounting for spatial correlation. Journal of Labor Research, 29(4), 303–317.

The relationship between minimum wage increases and youth employment is investigated using county-level data and spatial econometric techniques. Results that account for spatial correlation indicate that a 10% increase in the effective minimum wage is associated with a 3.2% decrease in youth employment, a result that is 28% higher than the corresponding estimate that does not control for spatial correlation. Thus, estimates that do not take into account spatial correlation may significantly underestimate the negative effect of the minimum wage on teenage employment. Improperly controlling for factors that vary systematically over space can lead to incorrect inferences and misinform policy.

Kalenkoski, C. M., & Lacombe, D. J. (2013). Minimum wages and teen employment: A spatial panel approach. Papers in Regional Science, 92(2), 407–417.

The authors employ spatial econometrics techniques and annual averages data from the US Bureau of Labor Statistics for 1990–2004 to examine how changes in the minimum wage affect teen employment. Spatial econometrics techniques account for the fact that employment is correlated across states. The authors find a combined direct and indirect effect of minimum wages on teen employment to be −2.1 per cent for a 10 per cent increase in the real effective minimum wage. Ignoring spatial correlation underestimates the magnitude of the effect of minimum wages on teen employment.

Meer J. & West, J. (2016). Effects of the minimum wage on employment dynamics. Journal of Human Resources, 51(2), 500-522.

The voluminous literature on minimum wages offers little consensus on the extent to which a wage floor impacts employment. We argue that the minimum wage will impact employment over time through changes in growth rather than an immediate drop in relative employment levels. We show that commonly used specifications in this literature, especially those that include state-specific time trends, will not accurately capture these effects. Using three separate state panels of administrative employment data, we find that the minimum wage reduces job growth over a period of several years. This finding is supported using several empirical specifications.

Neumark, D., Salas, J. M., & Wascher, W. (2014). More on recent evidence on the effects of minimum wages in the United States. IZA Journal of Labor Policy, 3(1), 24.

A central issue in estimating the employment effects of minimum wages is the appropriate comparison group for states (or other regions) that adopt or increase the minimum wage. In recent research, Dube et al. (Rev Econ Stat 92:945-964, 2010) and Allegretto et al. (Ind Relat 50:205-240, 2011) argue that past U.S. research is flawed because it does not restrict comparison areas to those that are geographically proximate and fails to control for changes in low-skill labor markets that are correlated with minimum wage increases. They argue that using “local controls” establishes that higher minimum wages do not reduce employment of less-skilled workers. In Neumark et al. (Ind Labor Relat Rev 67:608-648, 2014), we present evidence that their methods fail to isolate more reliable identifying information and lead to incorrect conclusions. Moreover, for subsets of treatment groups where the identifying variation they use is supported by the data, the evidence is consistent with past findings of disemployment effects. Allegretto SA, Dube A, Reich M, Zipperer B (2013a) Credible research designs for minimum wage studies. IZA Discussion Paper No. 7638, Bonn, Germany have challenged our conclusions, continuing the debate regarding some key issues regarding choosing comparison groups for estimating minimum wage effects. We explain these issues and evaluate the evidence. In general, we find little basis for their analyses and conclusions and argue that the best evidence still points to job loss from minimum wages for very low-skilled workers – in particular, for teens.

Neumark, D., Salas, J. M. I., & Wascher, W. (2014). Revisiting the minimum wage—employment debate: Throwing out the baby with the bathwater? ILR Review, 67(3_suppl), 608–648.

The authors revisit the long-running minimum wage–employment debate to assess new studies claiming that estimates produced by the panel data approach commonly used in recent minimum wage research are flawed by that approach’s failure to account for spatial heterogeneity. The new studies use research designs intended to control for this heterogeneity and conclude that minimum wages in the United States have not reduced employment. The authors explore the ability of the new research designs to isolate reliable identifying information, and they test the designs’ untested assumptions about the construction of better control groups. Their analysis reveals problems with the new research designs. Moreover, using methods that let the data identify the appropriate control groups, their results reaffirm the evidence of disemployment effects, with teen employment elasticities near −0.15. This evidence, they conclude, still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others.

Neumark, D., & Wascher, W. (2017). Reply to “Credible research designs for minimum wage studies.” ILR Review, 70(3), 593–609.

The authors make three points in this reply to the article by Allegretto, Dube, Reich, and Zipperer (ADRZ 2017). First, ADRZ shed no new light on the sensitivity of estimated minimum wage employment effects to the treatment of trends in state-level panel data, and they make some arguments in this context that are misleading or simply wrong. Second, the key issue ADRZ emphasize—using “close controls” to account for shocks that are correlated with minimum wage changes—does not generate large differences in findings, and ADRZ do not address evidence from Neumark, Salas, and Wascher (NSW 2014a) that questions the validity of the close controls used in Allegretto, Dube, and Reich’s (ADR 2011) and Dube, Lester, and Reich’s (DLR 2010) work. Third, ADRZ ignore or dismiss a growing number of studies that address in various ways the same issue of potential correlations between minimum wages and shocks to low-skill labor markets that ADRZ argue generate spurious evidence of disemployment effects, yet often find rather large negative effects of minimum wages on low-skilled employment.

Sabia, J. J. (2008). Minimum wages and the economic well-being of single mothers. Journal of Policy Analysis and Management, 27(4), 848–866.

Using pooled cross‐sectional data from the 1992 to 2005 March Current Population Survey (CPS), this study examines the relationship between minimum wage increases and the economic well‐being of single mothers. Estimation results show that minimum wage increases were ineffective at reducing poverty among single mothers. Most working single mothers were not affected by minimum wage hikes because they already earned wages above state and federal minimum wages. And less‐educated single mothers who were affected did not see a rise in net income because of negative employment and hours effects. For this low‐skilled population, a 10 percent increase in the minimum wage was associated with an 8.8 percent reduction in employment and an 11.8 percent reduction in annual hours worked.

Sabia, J. J. (2009). Identifying minimum wage effects: New evidence from monthly CPS data. Industrial Relations: A Journal of Economy and Society, 48(2), 311–328.

The appropriateness of including year effects in employment models has been a contentious issue in the minimum wage literature. Using monthly data from the 1979–2004 Current Population Surveys, I find consistent evidence of adverse labor demand effects for teenagers across specifications preferred by those on each side of this debate. Estimated employment elasticities range from –0.2 to –0.3 and unconditional hours elasticities from –0.4 to –0.5.

Sabia, J. J. (2009). The effects of minimum wage increases on retail employment and hours: New evidence from monthly CPS data. Journal of Labor Research, 30(1), 75–97.

Proponents of state and federal minimum wage increases argue that past minimum wage hikes have not adversely affected retail employment. However, the existing empirical evidence is mixed. This study uses monthly data from the 1979–2004 Current Population Survey to provide new estimates of the effect of minimum wage increases on retail employment and hours worked. The findings suggest evidence of modest adverse effects. A 10% increase in the minimum wage is associated with a 1% decline in retail trade employment and usual weekly hours worked. Larger negative employment and hours effects are observed for the least experienced workers in the retail sector. These results are robust across a number of specifications, but are sensitive to controls for state time trends.

Sabia, J. J., Burkhauser, R. V., & Hansen, B. (2012). Are the effects of minimum wage Increases always small? New evidence from a case study of New York State. ILR Review, 65(2), 350–376.

The authors estimate the effect of the 2004–6 New York State (NYS) minimum wage increase from $5.15 to $6.75 per hour on the employment rates of 16- to 29-year-olds who do not have a high school diploma. Using data drawn from the 2004 and 2006 Current Population Survey, they employ difference-in-difference estimates to show that the NYS minimum wage increase is associated with a 20.2% to 21.8% reduction in the employment of less-skilled, less-educated workers, with the largest effects on those aged 16 to 24. Their estimates imply a median employment elasticity with respect to the minimum wage of around −0.7, large relative to previous researchers’ estimates. The authors’ findings are robust to their choice of geographically proximate comparison states, the use of a more highly skilled within-state comparison group, and a synthetic control design approach. Moreover, their results provide plausible evidence that state minimum wage increases can have substantial adverse labor demand effects for low-skilled individuals that are outside previous elasticity estimates, ranging from −0.1 to −0.3.

Sabia, J. J., Burkhauser, R. V., & Hansen, B. (2016). When good measurement goes wrong. ILR Review, 69(2), 312–319.

Hoffman’s (2015) replication of Sabia, Burkhauser, and Hansen (SBH 2012) suggests that “unlucky” measurement error in low-skilled employment in the Current Population Survey Outgoing Rotation Groups (CPS-ORG) led SBH to produce upwardly biased estimates of the labor demand effects of the 2005 to 2006 New York State minimum wage increase. This study replicates Hoffman’s preferred policy estimates from the full CPS and finds evidence that the parallel trends assumption underlying his difference-in-difference approach is violated. When a synthetic control state with pretreatment employment trends similar to those in New York is constructed, this study estimates a relatively large negative employment elasticity with respect to the minimum wage for low-skilled individuals (–0.5), similar to the estimate SBH obtained using the CPS-ORG (–0.6).

Wessels, W. (2007). A reexamination of Card and Krueger’s state-level study of the minimum wage. Journal of Labor Research, 28(1), 135-146.

Card and Krueger’s (1995) difference-in-difference study of the 1990-1991 federal minimum wage hikes compared states by the proportion of workers directly affected by the minimum wage. They found “no evidence that the increase in the minimum wage significantly lowered teenage employment rates more in highly affected states” and they concluded the minimum wage did not reduce employment. Their paper was highly influential and convinced many that the minimum wage did not reduce employment. However, when I apply their model to the 1996-1997 federal minimum wage hike, I find that increases in the minimum wage significantly lowered teenage employment rates more in highly affected states. Using Card and Krueger’s interpretation, this implies the minimum wage did reduce teenage employment.

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