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Minimum Wage Effects on Hours, Employment, and Number of Firms: The Iowa Case

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  • PETER F. ORAZEM
  • J. PETER MATTILA

Abstract

Research on Iowa low-wage retail and service industries supports the view that minimum wages lower employment opportunities for workers. The sample period includes three successive changes in the Iowa minimum wage in 1990, 1991, and 1992, during which time the Iowa rate exceeded the federal minimum wage and that of its surrounding states. Firm-level longitudinal data which separated sub- from superminimum workers yielded employment demand elasticities ranging from -0.3 to -0.7. Hours elasticities were even larger, implying that the increases in minimum wages lowered earnings for subminimum workers. These findings are corroborated by analysis of county-level, two-digit industry data. Minimum wages also reduced the number of firms, but increased average firm size in these industries.

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Bibliographic Info

Article provided by Transaction Publishers in its journal Journal of Labor Research.

Volume (Year): 23 (2002)
Issue (Month): 1 (January)
Pages: 3-23

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Handle: RePEc:tra:jlabre:v:23:y:2002:i:1:p:3-23

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Web page: http://transactionpub.metapress.com/link.asp?target=journal&id=110581

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References

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  1. Jean Baldwin Grossman, 1983. "The Impact of the Minimum Wage on Other Wages," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 359-378.
  2. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-93, September.
  3. Katz, L.F. & Krueger, A.B., 1992. "The Effect of the Minimum Wage on the Fast Food Industry," Harvard Institute of Economic Research Working Papers 1584, Harvard - Institute of Economic Research.
  4. David Neumark & William Wascher, 1995. "The Effect of New Jersey's Minimum Wage Increase on Fast-Food Employment: A Re-Evaluation Using Payroll Records," NBER Working Papers 5224, National Bureau of Economic Research, Inc.
  5. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
  6. Orley Ashenfelter & David Card, 1982. "Time Series Representation of Economic Variables and Alternative Models of the Labor Market," Working Papers 528, Princeton University, Department of Economics, Industrial Relations Section..
  7. repec:fth:prinin:298 is not listed on IDEAS
  8. Frey, Bruno S, et al, 1984. "Consensus and Dissension among Economists: An Empirical Inquiry," American Economic Review, American Economic Association, vol. 74(5), pages 986-94, December.
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Citations

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Cited by:
  1. Nicole Coomer & Walter Wessels, 2013. "The Effect of the Minimum Wage on Covered Teenage Employment," Journal of Labor Research, Springer, vol. 34(3), pages 253-280, September.
  2. Christian Ragacs, 2003. "Mindestlöhne und Beschäftigung: Ein Überblick über die neuere empirische Literatur," Working Papers geewp25, Vienna University of Economics Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
  3. Addison, John T. & Blackburn, McKinley L. & Cotti, Chad, 2008. "New Estimates of the Effects of Minimum Wages in the U.S. Retail Trade Sector," IZA Discussion Papers 3597, Institute for the Study of Labor (IZA).
  4. Addison, John T. & Blackburn, McKinley L. & Cotti, Chad, 2008. "The Effect of Minimum Wages on Wages and Employment: County-Level Estimates for the United States," IZA Discussion Papers 3300, Institute for the Study of Labor (IZA).
  5. Nikita Céspedes & Alan Sánchez, 2013. "Minimum wage and job mobility," Documentos de Trabajo 2013-359, Departamento de Economía - Pontificia Universidad Católica del Perú.
  6. Christian Ragacs, 2003. "Mindestlöhne und Beschäftigung: die empirische Evidenz. Ein Literaturüberblick," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 29(2), pages 215-246.
  7. Rohlin, Shawn M., 2011. "State minimum wages and business location: Evidence from a refined border approach," Journal of Urban Economics, Elsevier, vol. 69(1), pages 103-117, January.
  8. Addison, John T. & Blackburn, McKinley L. & Cotti, Chad D., 2009. "Do minimum wages raise employment? Evidence from the U.S. retail-trade sector," Labour Economics, Elsevier, vol. 16(4), pages 397-408, August.

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