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The Effect of Minimum Wages Throughout the Wage Distribution

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Author Info
Neumark, D.
Schweitzer, M.
Wascher, W.

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Abstract

This paper provides evidence on a wide set of margins along which labor markets can adjust in response to increases in the minimum wage, including wages, hours, employment, and ultimately labor income, representing the central margins of adjustment that impact the economic well-being of workers potentially affected by minimum wage increases. The evidence indicates that workers initially earning near the minimum wage are adversely affected by minimum wage increases, while, not surprisingly, higher-wage workers are little affected. Although wages of low-wage workers increase, their hours and employment decline, and the combined effect of these changes is a decline in earned income. We also delve into the political economy of minimum wages, attempting to understand the vigorous support of labor unions for minimum wage increases. Using the same empirical framework, we find that relatively low-wage union members gain at the expense of the lowest-wage nonunion workers when minimum wages increase.

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Publisher Info
Paper provided by London School of Economics - Centre for Labour Economics in its series Papers with number 9919.

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Length: 29 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:fth:lseple:9919

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Postal: LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE, CENTER FOR LABOUR ECONOMICS, HOUGHTON STREET LONDON WC2A 2AE ENGLAND.
Phone: +44 (020) 7405 7686
Web page: http://www.lse.ac.uk/
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Related research
Keywords: MINIMUM WAGE INCOME DISTRIBUTION

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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Neumark, David & Wascher, William, 1995. "Minimum-Wage Effects on School and Work Transitions of Teenagers," American Economic Review, American Economic Association, vol. 85(2), pages 244-49, May. [Downloadable!] (restricted)
    Other versions:
  2. 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. [Downloadable!] (restricted)
  3. Linneman, Peter, 1982. "The Economic Impacts of Minimum Wage Laws: A New Look at an Old Question," Journal of Political Economy, University of Chicago Press, vol. 90(3), pages 443-69, June. [Downloadable!] (restricted)
  4. 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(1976-2), pages 409-462. [Downloadable!]
  5. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "Minimum Wages and Employment in France and the United States," NBER Working Papers 6996, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Lang, Kevin & Kahn, Shulamit, 1998. "The effect of minimum-wage laws on the distribution of employment: theory and evidence," Journal of Public Economics, Elsevier, vol. 69(1), pages 67-82, July. [Downloadable!] (restricted)
  7. Green, D.A. & Paarsch, H.J., 1997. "The Effect of the Minimum Wage on the Distribution of Teenage Wages," UBC Departmental Archives 97-2, UBC Department of Economics.
  8. Cox, James C & Oaxaca, Ronald L, 1982. "The Political Economy of Minimum Wage Legislation," Economic Inquiry, Oxford University Press, vol. 20(4), pages 533-55, October.
  9. David Neumark & Mark Schweitzer & William Wascher, 1998. "The Effects of Minimum Wages on the Distribution of Family Incomes: A Non-Parametric Analysis," NBER Working Papers 6536, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Zavodny, Madeline, 2000. "The effect of the minimum wage on employment and hours," Labour Economics, Elsevier, vol. 7(6), pages 729-750, November. [Downloadable!] (restricted)
  11. Victor R. Fuchs & Alan B. Krueger & James M. Poterba, 1998. "Economists' Views about Parameters, Values, and Policies: Survey Results in Labor and Public Economics," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1387-1425, September. [Downloadable!] (restricted)
  12. Baker, Michael & Benjamin, Dwayne & Stanger, Shuchita, 1999. "The Highs and Lows of the Minimum Wage Effect: A Time-Series Cross-Section Study of the Canadian Law," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 318-50, April. [Downloadable!] (restricted)
  13. Janet Currie & Bruce Fallick, 1993. "The Minimum Wage and the Employment of Youth: Evidence from the NLSY," NBER Working Papers 4348, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. 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. [Downloadable!] (restricted)
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Full references

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  1. Asep Suryahadi, & Wenefrida Widyanti & Daniel Perwira & Sudarno Sumarto, 2001. "The Impact of Minimum Wage Policy on Wages and Employment in Developing Countries: The Case of Indonesia," Economics Study Area Working Papers 38, East-West Center, Economics Study Area. [Downloadable!]
  2. Ximing Wu & Jeffrey Perloff & Amos Golan, 2002. "Effects of Government Policies on Income Distribution and Welfare," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series 950, Department of Agricultural & Resource Economics, UC Berkeley. [Downloadable!]
    Other versions:
  3. Marit Hinnosaar & Tairi Rõõm, 2003. "The impact of minimum wage on the labour market in Estonia: an empirical analysis," Bank of Estonia Working Papers 2003-8, Bank of Estonia, revised 12 Oct 2003. [Downloadable!]
  4. Andalon, Mabel & Pagés, Carmen, 2008. "Minimum Wages in Kenya," IZA Discussion Papers 3390, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Wolfgang Lechthaler & Dennis J. Snower, 2006. "Minimum Wages and Firm Training," Kiel Working Papers 1298, Kiel Institute for the World Economy. [Downloadable!]
  6. T. H. Gindling & Katherine Terrell, 2004. "The Effects of Multiple Minimum Wages Throughout the Labor Market," William Davidson Institute Working Papers Series 2004-701, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  7. Fairris, David & Popli, Gurleen & Zepeda, Eduardo, 2006. "Minimum wages and wage structure in Mexico," MPRA Paper 400, University Library of Munich, Germany, revised 2006. [Downloadable!]
  8. Nikita R. Céspedes Reynaga, 2005. "Efectos del Salario Mínimo en el Mercado Laboral Peruano," Working Papers 2005-003, Banco Central de Reserva del Perú. [Downloadable!]
  9. Stewart, Mark B. & Swaffield, Joanna K., 2006. "The other margin : do minimum wages cause working hours adjustments for low-wage workers?," The Warwick Economics Research Paper Series (TWERPS) 746, University of Warwick, Department of Economics. [Downloadable!]
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  10. Sara Lemos, 2007. "A Survey of the Effects of the Minimum Wage in Latin America," Discussion Papers in Economics 07/04, Department of Economics, University of Leicester. [Downloadable!]
  11. Basu, Arnab K & Chau, Nancy H & Kanbur, Ravi, 2005. "Turning a Blind Eye: Costly Enforcement, Credible Commitment and Minimum Wage Laws," CEPR Discussion Papers 5107, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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