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City Limits: What Do Local-Area Minimum Wages Do?

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  • Arindrajit Dube
  • Attila Lindner

Abstract

Cities are increasingly setting their own minimum wages, and this trend has accelerated sharply in recent years. While in 2010 there were only three cities with their own minimum wages exceeding the state or federal standard, by 2020 there were 42. This new phenomenon raises the question: is it desirable to have city-level variation in minimum wage polices? We discuss the main trade-offs emerging from local variation in minimum wage polices and evaluate their empirical relevance. First, we document what type of cities raise minimum wages, and we discuss how these characteristics can potentially impact the effectiveness of city-level minimum wage policies. Second, we summarize the evolving evidence on city-level minimum wage changes and provide some new evidence of our own. Early evidence suggests that the impact of the policy on wages and employment to date has been broadly similar to the evidence on state- and federal-level minimum wage changes. Overall, city-level minimum wages seem to be able to tailor the policy to the local economic environment without imposing substantial distortions in allocation of labor and businesses across locations.

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  • Arindrajit Dube & Attila Lindner, 2021. "City Limits: What Do Local-Area Minimum Wages Do?," Journal of Economic Perspectives, American Economic Association, vol. 35(1), pages 27-50, Winter.
  • Handle: RePEc:aea:jecper:v:35:y:2021:i:1:p:27-50
    DOI: 10.1257/jep.35.1.27
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    Cited by:

    1. Erik Hurst & Patrick J. Kehoe & Elena Pastorino & Thomas Winberry, 2022. "The Distributional Impact of the Minimum Wage in the Short and Long Run," NBER Working Papers 30294, National Bureau of Economic Research, Inc.
    2. Loukas Karabarbounis & Jeremy Lise & Anusha Nath, 2022. "Minimum Wages and Labor Markets in the Twin Cities," NBER Working Papers 30239, National Bureau of Economic Research, Inc.
    3. Gabriele Borg & Diego Gentile Passaro & Santiago Hermo, 2022. "Minimum Wage as a Place-Based Policy: Evidence from US Housing Rental Markets," Papers 2208.01791, arXiv.org.
    4. Todd, P. & Zhang, W., 2022. "Distributional Effects of Local Minimum Wages: A Spatial Job Search Approach," Cambridge Working Papers in Economics 2265, Faculty of Economics, University of Cambridge.
    5. Perez Perez, Jorge, 2020. "City Minimum Wages and Spatial Equilibrium Effects," SocArXiv fpx9e, Center for Open Science.
    6. Datta, Nikhil & Machin, Stephen, 2021. "Living wages and age discontinuities for low-wage workers," LSE Research Online Documents on Economics 113856, London School of Economics and Political Science, LSE Library.
    7. Petra E. Todd & Weilong Zhang, 2022. "Distributional Effects of Local Minimum Wages: A Spatial Job Search Approach," PIER Working Paper Archive 22-027, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    8. Michael Reich, 2021. "The Economics Of A $15 Federal Minimum Wage By 2025," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 40(4), pages 1297-1305, September.
    9. Kakkar, Shrey, 2021. "Significant movements in the debate on the Minimum Wage (1994 - 2019)," MPRA Paper 110185, University Library of Munich, Germany.
    10. Koki Arai, 2021. "The Characteristics of Low Bid Price Survey Standards and Their Impact," Journal of Industry, Competition and Trade, Springer, vol. 21(4), pages 593-608, December.
    11. Orley Ashenfelter & Stepan Jurajda Jurajda, 2021. "Wages, Minimum Wages, and Price Pass-Through: The Case of McDonald's Restaurants," Working Papers 646, Princeton University, Department of Economics, Industrial Relations Section..
    12. Aedin Doris & Donal O'Neill & Olive Sweetman, 2022. "The Introduction of a Living Wage in Ireland," Economics Department Working Paper Series n316-22.pdf, Department of Economics, National University of Ireland - Maynooth.
    13. Jonathan Cribb & Giulia Giupponi & Robert Joyce & Attila Lindner & Tom Waters & Thomas Wernham & Xiaowei Xu, 2021. "The distributional and employment impacts of nationwide Minimum Wage changes," IFS Working Papers W21/48, Institute for Fiscal Studies.

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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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