IDEAS home Printed from https://ideas.repec.org/a/aea/aejapp/v11y2019i4p268-304.html
   My bibliography  Save this article

Minimum Wages and the Distribution of Family Incomes

Author

Listed:
  • Arindrajit Dube

Abstract

There is robust evidence that higher minimum wages increase family incomes at the bottom of the distribution. The long-run (3 or more years) minimum wage elasticity of the non-elderly poverty rate with respect to the minimum wage ranges between −0.220 and −0.459 across alternative specifications. The long-run minimum wage elasticities for the tenth and fifteenth unconditional quantiles of family income range between 0.152 and 0.430 depending on specification. A reduction in public assistance partly offsets these income gains, which are on average 66 percent as large when using an expanded income definition including tax credits and noncash transfers.

Suggested Citation

  • Arindrajit Dube, 2019. "Minimum Wages and the Distribution of Family Incomes," American Economic Journal: Applied Economics, American Economic Association, vol. 11(4), pages 268-304, October.
    • Handle: RePEc:aea:aejapp:v:11:y:2019:i:4:p:268-304
    Note: DOI: 10.1257/app.20170085
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/app.20170085
    Download Restriction: no
    File URL: https://www.aeaweb.org/content/file?id=10645
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/app.20170085.ds
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. David Neumark & Mark Schweitzer & William Wascher, 2005. "The Effects of Minimum Wages on the Distribution of Family Incomes: A Nonparametric Analysis," Journal of Human Resources, University of Wisconsin Press, vol. 40(4), pages 867-894.
    2. David H. Autor & Alan Manning & Christopher L. Smith, 2016. "The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment," American Economic Journal: Applied Economics, American Economic Association, vol. 8(1), pages 58-99, January.
    3. Ernst Fehr & Urs Fischbacher, "undated". "Third Party Punishment and Social Norms," IEW - Working Papers 106, Institute for Empirical Research in Economics - University of Zurich.
    4. Marianne E. Page & Joanne Spetz & Jane Millar, 2005. "Does the minimum wage affect welfare caseloads?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 24(2), pages 273-295.
    5. Thomas MaCurdy, 2015. "How Effective Is the Minimum Wage at Supporting the Poor?," Journal of Political Economy, University of Chicago Press, vol. 123(2), pages 497-545.
    6. Havnes, Tarjei & Mogstad, Magne, 2015. "Is universal child care leveling the playing field?," Journal of Public Economics, Elsevier, vol. 127(C), pages 100-114.
    7. Fortin, Nicole & Lemieux, Thomas & Firpo, Sergio, 2011. "Decomposition Methods in Economics," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 1, pages 1-102, Elsevier.
    8. Tito Boeri & Pietro Garibaldi & Marta Ribeiro, 2011. "The Lighthouse Effect And Beyond," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57, pages 54-78, May.
    9. Sylvia Allegretto & Arindrajit Dube & Michael Reich & Ben Zipperer, 2017. "Credible Research Designs for Minimum Wage Studies," ILR Review, Cornell University, ILR School, vol. 70(3), pages 559-592, May.
    10. Jonathan Meer & Jeremy West, 2016. "Effects of the Minimum Wage on Employment Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 51(2), pages 500-522.
    11. Justin Wolfers, 2006. "Did Unilateral Divorce Laws Raise Divorce Rates? A Reconciliation and New Results," American Economic Review, American Economic Association, vol. 96(5), pages 1802-1820, December.
    12. Liana Fox & Irwin Garfinkel & Neeraj Kaushal & Jane Waldfogel & Christopher Wimer, 2014. "Waging War on Poverty: Historical Trends in Poverty Using the Supplemental Poverty Measure," NBER Working Papers 19789, National Bureau of Economic Research, Inc.
    13. David R. Morgan & Kenneth Kickham, 2001. "Children in Poverty: Do State Policies Matter?," Social Science Quarterly, Southwestern Social Science Association, vol. 82(3), pages 478-493, September.
    14. David Neumark & William Wascher, 2011. "Does a Higher Minimum Wage Enhance the Effectiveness of the Earned Income Tax Credit?," ILR Review, Cornell University, ILR School, vol. 64(4), pages 712-746, July.
    15. Edward M. Gramlich, 1976. "Impact of Minimum Wages on Other Wages, Employment, and Family Incomes," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(2), pages 409-462.
    16. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    17. Ilyana Kuziemko & Michael I. Norton & Emmanuel Saez & Stefanie Stantcheva, 2015. "How Elastic Are Preferences for Redistribution? Evidence from Randomized Survey Experiments," American Economic Review, American Economic Association, vol. 105(4), pages 1478-1508, April.
    18. Sylvia A. Allegretto & Arindrajit Dube & Michael Reich, 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, Wiley Blackwell, vol. 50(2), pages 205-240, April.
    19. David Neumark & William Wascher, 2002. "Do Minimum Wages Fight Poverty?," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 315-333, July.
    20. Joseph J. Sabia, 2014. "Minimum Wages: An Antiquated And Ineffective Antipoverty Tool," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 33(4), pages 1028-1036, September.
    21. Joseph J. Sabia & Richard V. Burkhauser, 2010. "Minimum Wages and Poverty: Will a $9.50 Federal Minimum Wage Really Help the Working Poor?," Southern Economic Journal, John Wiley & Sons, vol. 76(3), pages 592-623, January.
    22. David Neumark, 2016. "Policy levers to increase jobs and increase income from work after the Great Recession," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-38, December.
    23. Craig Gundersen & James Ziliak, 2004. "Poverty and macroeconomic performance across space, race, and family structure," Demography, Springer;Population Association of America (PAA), vol. 41(1), pages 61-86, February.
    24. Lonnie Stevans & David Sessions, 2001. "Minimum Wage Policy and Poverty in the United States," International Review of Applied Economics, Taylor & Francis Journals, vol. 15(1), pages 65-75.
    25. John T. Addison & McKinleyl Blackburn, 1999. "Minimum Wages and Poverty," ILR Review, Cornell University, ILR School, vol. 52(3), pages 393-409, April.
    26. Michael Reich & Rachel West, 2015. "The Effects of Minimum Wages on Food Stamp Enrollment and Expenditures," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 54(4), pages 668-694, October.
    27. Joseph J. Sabia, 2008. "Minimum wages and the economic well-being of single mothers," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(4), pages 848-866.
    28. Nathaniel Hendren, 2014. "Measuring Economic Efficiency Using Inverse-Optimum Weights," NBER Working Papers 20351, National Bureau of Economic Research, Inc.
    29. Dale Belman & Paul J. Wolfson, 2014. "What Does the Minimum Wage Do?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wdmwd, August.
    30. Steven F. Lehrer & R. Vincent Pohl & Kyungchul Song, 2016. "Targeting Policies: Multiple Testing and Distributional Treatment Effects," NBER Working Papers 22950, National Bureau of Economic Research, Inc.
    31. Richard V. Burkhauser & Joseph J. Sabia, 2007. "The Effectiveness Of Minimum‐Wage Increases In Reducing Poverty: Past, Present, And Future," Contemporary Economic Policy, Western Economic Association International, vol. 25(2), pages 262-281, April.
    32. David S. Lee, 1999. "Wage Inequality in the United States During the 1980s: Rising Dispersion or Falling Minimum Wage?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 977-1023.
    33. Reich, Michael & West, Rachel, 2015. "The Effects of Minimum Wages on Food Stamp Enrollment and Expenditures," Institute for Research on Labor and Employment, Working Paper Series qt0wh9z8x4, Institute of Industrial Relations, UC Berkeley.
    34. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
    35. David A. Green & Kathryn Harrison, 2010. "Minimum wage setting and standards of fairness," IFS Working Papers W10/09, Institute for Fiscal Studies.
    36. David Neumark & J. M. Ian Salas & William Wascher, 2014. "Revisiting the Minimum Wage—Employment Debate: Throwing Out the Baby with the Bathwater?," ILR Review, Cornell University, ILR School, vol. 67(3_suppl), pages 608-648, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Teresa Backhaus & Kai-Uwe Müller, 2019. "Does the German Minimum Wage Help Low Income Households?: Evidence from Observed Outcomes and the Simulation of Potential Effects," Discussion Papers of DIW Berlin 1805, DIW Berlin, German Institute for Economic Research.
    2. Alexandros Karakitsios & Manos Matsaganis, 2018. "Minimum Wage Effects on Poverty and Inequality," DEOS Working Papers 1801, Athens University of Economics and Business.
    3. Sotomayor, Orlando J., 2021. "Can the minimum wage reduce poverty and inequality in the developing world? Evidence from Brazil," World Development, Elsevier, vol. 138(C).
    4. Richard V. Burkhauser & Drew McNichols & Joseph J. Sabia, 2023. "Minimum Wages and Poverty: New Evidence from Dynamic Difference-in-Differences Estimates," NBER Working Papers 31182, National Bureau of Economic Research, Inc.
    5. Backhaus, Teresa & Müller, Kai-Uwe, 2019. "Does the German minimum wage benefit low income households?," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203585, Verein für Socialpolitik / German Economic Association.
    6. Brady P. Horn & Johanna Catherine Maclean & Michael R. Strain, 2017. "Do Minimum Wage Increases Influence Worker Health?," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1986-2007, October.
    7. Arpaia, Alfonso & Cardoso, Pedro & Kiss, Aron & Van Herck, Kristine & Vandeplas, Anneleen, 2017. "Statutory Minimum Wages in the EU: Institutional Settings and Macroeconomic Implications," IZA Policy Papers 124, Institute of Labor Economics (IZA).
    8. Amanda Y. Agan & Michael D. Makowsky, 2018. "The Minimum Wage, EITC, and Criminal Recidivism," Working Papers 616, Princeton University, Department of Economics, Industrial Relations Section..
    9. David Neumark, 2016. "Policy levers to increase jobs and increase income from work after the Great Recession," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-38, December.
    10. David Neumark & Maysen Yen, 2021. "The Employment and Redistributive Effects of Reducing or Eliminating Minimum Wage Tip Credits," NBER Working Papers 29213, National Bureau of Economic Research, Inc.
    11. Raissian, Kerri M. & Bullinger, Lindsey Rose, 2017. "Money matters: Does the minimum wage affect child maltreatment rates?," Children and Youth Services Review, Elsevier, vol. 72(C), pages 60-70.
    12. George L. Wehby & Dhaval M. Dave & Robert Kaestner, 2020. "Effects of the Minimum Wage on Infant Health," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(2), pages 411-443, March.
    13. Joseph J. Sabia & Richard V. Burkhauser & Taylor Mackay, 2018. "Minimum Cash Wages, Tipped Restaurant Workers, and Poverty," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 57(4), pages 637-670, October.
    14. Pérez Pérez, Jorge, 2020. "The minimum wage in formal and informal sectors: Evidence from an inflation shock," World Development, Elsevier, vol. 133(C).
    15. David Neumark & Maysen Yen, 2023. "The employment and redistributive effects of reducing or eliminating minimum wage tip credits," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 42(4), pages 1092-1116, September.
    16. Clemens, Jeffrey & Wither, Michael, 2019. "The minimum wage and the Great Recession: Evidence of effects on the employment and income trajectories of low-skilled workers," Journal of Public Economics, Elsevier, vol. 170(C), pages 53-67.
    17. Regmi, Krishna, 2020. "The effect of the minimum wage on children’s cognitive achievement," Labour Economics, Elsevier, vol. 65(C).
    18. Romich, Jennifer L. & Althauser, Anne K. & Allard, Scott William & Long, Mark C. & Vigdor, Jacob, 2018. "Linking Administrative Data to Understand Effects of Seattle’s $15 Minimum Wage Ordinance," OSF Preprints egvwq, Center for Open Science.
    19. Fone, Zachary S. & Sabia, Joseph J. & Cesur, Resul, 2023. "The unintended effects of minimum wage increases on crime," Journal of Public Economics, Elsevier, vol. 219(C).
    20. David Neumark, 2019. "The Econometrics and Economics of the Employment Effects of Minimum Wages: Getting from Known Unknowns to Known Knowns," German Economic Review, Verein für Socialpolitik, vol. 20(3), pages 293-329, August.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejapp:v:11:y:2019:i:4:p:268-304. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.