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Effects of the Minimum Wage on Employment Dynamics

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  • Jonathan Meer
  • Jeremy West

Abstract

The voluminous literature on minimum wages offers little consensus on the extent to which a wage floor impacts employment. For both theoretical and econometric reasons, we argue that the effect of the minimum wage should be more apparent in new employment growth than in employment levels. In addition, we conduct a simulation showing that the common practice of including state-specific time trends will attenuate the measured effects of the minimum wage on employment if the true effect is in fact on the rate of job growth. Using three separate state panels of administrative employment data, we find that the minimum wage reduces net job growth, primarily through its effect on job creation by expanding establishments. These effects are most pronounced for younger workers and in industries with a higher proportion of low-wage workers.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19262.

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Date of creation: Aug 2013
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Handle: RePEc:nbr:nberwo:19262

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Cited by:
  1. Joachim Möller & Karl Brenke & Gert Wagner & Thorsten Schulten & Gustav Horn & Hagen Lesch & Alexander Mayer & Lisa Schmid & Patrick Arni & Werner Eichhorst & Alexander Spermann & Klaus Zimmermann, 2014. "Das Mindestlohngesetz — Hoffnungen und Befürchtungen," Wirtschaftsdienst, Springer, vol. 94(6), pages 387-406, June.
  2. Dube, Arindrajit, 2013. "Minimum Wages and Aggregate Job Growth: Causal Effect or Statistical Artifact?," IZA Discussion Papers 7674, Institute for the Study of Labor (IZA).
  3. 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).
  4. Huang, Yi & Loungani, Prakash & Wang, Gewei, 2014. "Minimum wages and firm employment: evidence from China," Globalization and Monetary Policy Institute Working Paper 173, Federal Reserve Bank of Dallas.

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