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The Effect of Minimum Wages on Labour Market Outcomes: County-Level Estimates from the Restaurant-and-Bar Sector

  • John T. Addison
  • McKinley L. Blackburn
  • Chad D. Cotti

We use county-level data on employment and earnings in the restaurant-and-bar sector to evaluate the impact of minimum wage changes on low-wage labor markets. Our empirical approach is similar to the literature that has used state-level panel data to estimate minimum-wage impacts, with the difference that we focus on a particular sector rather than demographic group. Our estimated models are consistent with a simple competitive model of the restaurant-and-bar labor market in which supply-and-demand factors affect both the equilibrium outcome and the probability that a minimum wage will be binding in any given time period. Our evidence does not suggest that minimum wages reduce employment in the overall restaurant-and-bar sector, after controls for trends in sector employment at the county level are incorporated in the model. Employment in this sector appears to exhibit a downward long-term trend in states that have increased their minimum wages relative to states that have not, thereby predisposing fixed-effects estimates towards finding negative employment effects.

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File URL: http://hdl.handle.net/10.1111/j.1467-8543.2010.00819.x
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Article provided by London School of Economics in its journal British Journal of Industrial Relations.

Volume (Year): 50 (2012)
Issue (Month): 3 (09)
Pages: 412-435

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Handle: RePEc:bla:brjirl:v:50:y:2012:i:3:p:412-435
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