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Mandated Wage Floors and the Wage Structure: New Estimates of the Ripple Effects of Minimum Wage Laws

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  • Jeannette Wicks-Lim
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    Abstract

    Minimum wage laws have become a key political issue, following on the heels of over 130 successful living wage campaigns around the country. In the debates surrounding these mandated wage floors, one recurring issue has been whether the legislation has wider-ranging impacts on wages than the legally-required raises alone. Advocates on both sides of the debate dispute the potential magnitude of 'ripple effects'- the non-mandated raises given by employers to maintain a similar wage hierarchy before and after a change in the wage floor. These ripple effects have the potential to greatly expand the overall impact of mandated wage floors. This study uses data from twenty years of the Current Population Survey to assess the magnitude of ripple effects in the context of variations in minimum wage laws, and looks specifically at the retail trade sector to model the potential magnitude of ripple effects under living wage ordinances, where the 'bite' of the legislation would encompass a larger share of the workforce.

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    Bibliographic Info

    Paper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp116.

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    Date of creation: 2006
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    Handle: RePEc:uma:periwp:wp116

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    Keywords: ripple effect; wage spillover; wage norms; minimum wage; living wage; wage distribution; retail trade; low wage;

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    1. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, December.
    2. David Neumark & DMark Schweitzer & DaWilliam Wascher, 2004. "Minimum Wage Effects throughout the Wage Distribution," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
    3. Jeannette Wicks-Lim & Mark D. Brenner & Robert Pollin, 2004. "Economic Analysis of the Florida Minimum Wage Proposal," Published Studies ps17, Political Economy Research Institute, University of Massachusetts at Amherst.
    4. Robert Pollin, 2003. "Testimony on Proposed Santa Fe, New Mexico Living Wage Ordinance," Research Reports rr6, Political Economy Research Institute, University of Massachusetts at Amherst.
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