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Are Minimum Wage Effects Greater in Low‐Wage Areas?

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  • Anna Godoey
  • Michael Reich

Abstract

Empirical work on the minimum wage typically estimates effects averaged across high‐ and low‐wage areas. Low‐wage labor markets could potentially be less able to absorb minimum wage increases, in turn leading to more negative employment effects. In this article, we examine minimum wage effects in low‐wage counties, where relative minimum wage ratios reach as high as 0.82, well beyond the state‐based ratios in extant studies. Using data from the American Community Survey, the Quarterly Workforce Indicators, and the Quarterly Census on Employment and Wages, we implement event study and difference‐in‐differences methods, estimating average causal effects for all events in our sample and separately for areas with lower and higher impacts. We find positive wage effects, especially in high‐impact counties, but do not detect adverse effects on employment, weekly hours, or annual weeks worked. We do not find negative employment effects among women, Blacks, and/or Hispanics. In high‐impact counties, we find substantial declines in household and child poverty. These results inform policy debates about providing exemptions to a $15 federal minimum wage in low‐wage areas.

Suggested Citation

  • Anna Godoey & Michael Reich, 2021. "Are Minimum Wage Effects Greater in Low‐Wage Areas?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 60(1), pages 36-83, January.
    • Handle: RePEc:bla:indres:v:60:y:2021:i:1:p:36-83
    DOI: 10.1111/irel.12267
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    References listed on IDEAS

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    1. Doruk Cengiz & Arindrajit Dube & Attila Lindner & Ben Zipperer, 2019. "The Effect of Minimum Wages on Low-Wage Jobs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(3), pages 1405-1454.
    2. Anne Case & Angus Deaton, 2017. "Mortality and Morbidity in the 21st Century," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 48(1 (Spring), pages 397-476.
    3. Paul Wolfson & Dale Belman, 2019. "15 Years of Research on US Employment and the Minimum Wage," LABOUR, CEIS, vol. 33(4), pages 488-506, December.
    4. Peter Harasztosi & Attila Lindner, 2019. "Who Pays for the Minimum Wage?," American Economic Review, American Economic Association, vol. 109(8), pages 2693-2727, August.
    5. Julien Lafortune & Jesse Rothstein & Diane Whitmore Schanzenbach, 2018. "School Finance Reform and the Distribution of Student Achievement," American Economic Journal: Applied Economics, American Economic Association, vol. 10(2), pages 1-26, April.
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    Cited by:

    1. 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.
    2. Mark Bils & Bariş Kaymak & Kai-Jie Wu, 2025. "Robinson Meets Roy: Monopsony Power and Comparative Advantage," NBER Working Papers 34165, National Bureau of Economic Research, Inc.
    3. Lestari Agusalim & Hermanto Siregar & Lukytawati Anggraeni & Sri Mulatsih, 2025. "The Heterogeneous Effects of a Minimum Wage Policy on Hours Worked and Real Wages in Indonesia," Economic Research Guardian, Mutascu Publishing, vol. 15(1), pages 88-115, June.
    4. 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.
    5. Lehner, Lukas & Massenbauer, Hannah & Parolin, Zachary & Pintro Schmitt, Rafael, 2025. "The Effects of Minimum Wage Increases on Poverty and Food Hardship," IZA Discussion Papers 18142, Institute of Labor Economics (IZA).

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