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The Effects of Minimum Wages Throughout the Wage Distribution

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Author Info
David Neumark
Mark Schweitzer
William Wascher

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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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7519.

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Date of creation: Feb 2000
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Handle: RePEc:nbr:nberwo:7519

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Find related papers by JEL classification:
J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
I3 - Health, Education, and Welfare - - Welfare and Poverty

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References listed on IDEAS
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  1. 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)
  2. 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)
  3. 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)
  4. 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.
  5. David Neumark & William Wascher, 1995. "Minimum wage effects on school and work transitions of teenagers," Finance and Economics Discussion Series 95-7, Board of Governors of the Federal Reserve System (U.S.).
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  6. 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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  7. 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)
  8. Abowd, John M & Kramarz, Francis & Margolis, David N, 1999. "Minimum Wages and Employment in France and the United States," CEPR Discussion Papers 2159, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. 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)
  10. 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!]
  11. 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.
  12. 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)
  13. 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)
  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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(explanations, 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. Diego Angel-Urdinola, 2008. "Can a minimum wage increase have an adverse impact on inequality? Evidence from two Latin American economies," Journal of Economic Inequality, Springer, vol. 6(1), pages 57-71, March. [Downloadable!] (restricted)
  2. Pablo Fajnzylber, 2001. "Minimum Wage Effects Throughout the Wage Distribution: Evidence from Brazil's Formal and Informal Sectors," Anais do XXIX Encontro Nacional de Economia [Proceedings of the 29th Brazilian Economics Meeting] 098, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
  3. 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!]
    Other versions:
  4. Pablo Fajnzylber, 2001. "Minimum wage effects throughout the wage distribution: evidence from Brazil’s formal and informal sectors," Textos para Discussão Cedeplar-UFMG td151, Cedeplar, Universidade Federal de Minas Gerais. [Downloadable!]
  5. Céspedes, Nikita, 2006. "Efectos del salario mínimo en el mercado laboral peruano," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 13. [Downloadable!]
  6. Felipe Balmaceda, 2008. "Firm-Provided Training and Labor Market Policies," Documentos de Trabajo 252, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
  7. 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!]
  8. 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!]
  9. 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!]
  10. Gindling, T. H. & Terrell, Katherine, 2004. "The Effects of Multiple Minimum Wages Throughout the Labor Market," IZA Discussion Papers 1159, Institute for the Study of Labor (IZA). [Downloadable!]
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  11. Kosali Ilayperuma Simon & Robert Kaestner, 2003. "Do Minimum Wages Affect Non-wage Job Attributes? Evidence on Fringe Benefits and Working Conditions," NBER Working Papers 9688, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Arnab K. Basu, 2005. "Turning A Blind Eye: Costly Enforcement, Credible Commitment And Minimum Wage," Working Papers id:180, esocialsciences.com. [Downloadable!]
  13. Daniel Fairchild, 2004. "Does the minimum wage help the poor?," Forum for Social Economics, Springer, vol. 34(1), pages 31-42, September. [Downloadable!] (restricted)
  14. 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!]
  15. Strobl, Eric & Walsh, Frank, 2008. "The Ambiguous Effect of Minimum Wages on Workers and Total Hours," IZA Discussion Papers 3643, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  16. 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:
  17. Andalon, Mabel & Pagés, Carmen, 2008. "Minimum Wages in Kenya," IZA Discussion Papers 3390, Institute for the Study of Labor (IZA). [Downloadable!]
  18. Wolfgang Lechthaler & Dennis J. Snower, 2006. "Minimum Wages and Firm Training," Kiel Working Papers 1298, Kiel Institute for the World Economy. [Downloadable!]
  19. 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!]
  20. 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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