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Are the Effects of Minimum Wage Increases Always Small? New Evidence from a Case Study of New York State

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Author Info

  • Joseph J. Sabia
  • Richard V. Burkhauser
  • Benjamin Hansen

Abstract

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.

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Bibliographic Info

Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 65 (2012)
Issue (Month): 2 (April)
Pages: 350-376

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Handle: RePEc:ilr:articl:v:65:y:2012:i:2:p:350-376

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Cited by:
  1. David Neumark & J.M. Ian Salas & William Wascher, 2013. "Revisiting the Minimum Wage-Employment Debate: Throwing Out the Baby with the Bathwater?," NBER Working Papers 18681, National Bureau of Economic Research, Inc.
  2. Saul D. Hoffman, 2014. "Are the Effects of Minimum Wage Increases Always Small? A Re-Analysis of Sabia, Burkhauser, and Hansen," Working Papers 14-06, University of Delaware, Department of Economics.
  3. Jonathan Meer & Jeremy West, 2013. "Effects of the Minimum Wage on Employment Dynamics," NBER Working Papers 19262, National Bureau of Economic Research, Inc.
  4. Ritzen, Jo & Zimmermann, Klaus F., 2013. "A Vibrant European Labor Market with Full Employment," IZA Policy Papers 73, Institute for the Study of Labor (IZA).
  5. John Schmitt, 2013. "Why Does the Minimum Wage Have No Discernible Effect on Employment?," CEPR Reports and Issue Briefs 2013-04, Center for Economic and Policy Research (CEPR).

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