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Measuring the Impact of Living Wage Laws: A Critical Appraisal of David Neumark's How Living Wage Laws Affect Low-Wage Workers and Low-Income Families

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  • Robert Pollin
  • Jeannette Wicks-Lim
  • Mark D. Brenner
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    Abstract

    Drawing on data from the Current Population Survey (CPS), David Neumark (2002) finds that living wage laws have brought substantial wage increases for a high proportion of workers in cities that have passed these laws. He also finds that living wage laws significantly reduce employment opportunities for low-wage workers. We argue, first, that by truncating his sample to concentrate his analysis on low-wage workers, Neumark’s analysis is vulnerable to sample selection bias, and that his results are not robust to alternative specifications that utilize quantile regression to avoid such selection bias. In addition, we argue that Neumark has erroneously utilized the CPS data set to derive these results. We show that, with respect to both wage and employment effects, Neumark’s results are not robust to more accurate alternative classifications as to which workers are covered by living wage laws. We also show that the wage effects that Neumark observes for all U.S. cities with living wage laws can be more accurately explained as resulting from effects on sub-minimum wage workers in Los Angeles alone of a falling unemployment rate and rising minimum wage in that city.

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    Paper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp43.

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    Date of creation: 2002
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    Handle: RePEc:uma:periwp:wp43

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    1. Katz, L.F. & Krueger, A.B., 1992. "The Effect of the Minimum Wage on the Fast Food Industry," Harvard Institute of Economic Research Working Papers 1584, Harvard - Institute of Economic Research.
    2. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521608275, October.
    3. Robert Pollin & Mark Brenner, 2000. "Economic Analysis of Santa Monica Living Wage Proposal," Research Reports rr2, Political Economy Research Institute, University of Massachusetts at Amherst.
    4. Nada Eissa & Jeffrey B. Liebman, 1995. "Labor Supply Response to the Earned Income Tax Credit," NBER Working Papers 5158, National Bureau of Economic Research, Inc.
    5. Killingsworth, Mark R. & Heckman, James J., 1987. "Female labor supply: A survey," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 2, pages 103-204 Elsevier.
    6. repec:fth:prinin:298 is not listed on IDEAS
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    Cited by:
    1. Oren M. Levin-Waldman, 2004. "Exploring the Demographic Factors Affecting Passage of Living Wage Ordinances," Working Papers wp88, Political Economy Research Institute, University of Massachusetts at Amherst.
    2. 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.
    3. Holzer, Harry J., 2008. "Living Wage Laws: How Much Do (Can) They Matter?," IZA Discussion Papers 3781, Institute for the Study of Labor (IZA).

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