Effects of the Minimum Wage on Employment Dynamics
AbstractThe 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 InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19262.
Date of creation: Aug 2013
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Note: LS PE
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Find related papers by JEL classification:
- J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-05 (All new papers)
- NEP-LAB-2013-08-05 (Labour Economics)
- NEP-LMA-2013-08-05 (Labor Markets - Supply, Demand, & Wages)
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