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Puerto Rico's minimum wage: Revisiting a price floor with bite

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  • Omberg Robert Tucker

    (George Mason University, Department of Economics, 4400 University Dr.FairfaxVA22030)

Abstract

Revisiting research from the 1990s from Castillo-Freeman and Krueger, I use the synthetic control method of Abadie et al. to estimate the impact of the most recent increase in the federal minimum wage on employment in Puerto Rico. I estimate that the employment/population ratio of various groups in Puerto Rico was significantly lower than that of a data-constructed synthetic Puerto Rico which did not raise its minimum wage. Placebo tests on other donor units, time periods, and population groups suggest that a significant portion of this gap is a result of the minimum wage. Groups with greater exposure to the minimum wage, such as teens and restaurant workers, experienced proportionally greater declines in employment. My results suggest an own-wage elasticity of employment in Puerto Rico of −0.68, higher than estimates from the mainland, which suggests that the employment response to minimum wages may be more dramatic at higher relative minimum wages.

Suggested Citation

  • Omberg Robert Tucker, 2021. "Puerto Rico's minimum wage: Revisiting a price floor with bite," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 11(1), pages 1-25, January.
    • Handle: RePEc:vrs:izajlp:v:11:y:2021:i:1:p:25:n:2
    DOI: 10.2478/izajolp-2021-0009
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    References listed on IDEAS

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    1. 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 772-793, September.
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    4. Radhakrishnan Gopalan & Barton H. Hamilton & Ankit Kalda & David Sovich, 2021. "State Minimum Wages, Employment, and Wage Spillovers: Evidence from Administrative Payroll Data," Journal of Labor Economics, University of Chicago Press, vol. 39(3), pages 673-707.
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    More about this item

    Keywords

    Minimum Wage; Puerto Rico; Synthetic Controls;
    All these keywords.

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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