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Estimating the effect of minimum wages on employment from the distribution of wages: A critical view

  • Dickens, Richard
  • Machin, Stephen
  • Manning, Alan

In two papers, Meyer and Wise (1983a,b) present an ingenious method for estimating the effect of minimum wage rates on wages and employment using data based only on the observed cross-sectional distribution of wages. They, and others who have used this method, have generally found that the minimum wage causes substantial losses in employment. In this paper we evaluate the robustness of this technique. We argue that the estimates, at least for the UK, are very sensitive to the functional form assumed for the distribution of wages and to the assumption made about how far up the wage distribution the minimum wage has spillover effects.

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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 5 (1998)
Issue (Month): 2 (June)
Pages: 109-134

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Handle: RePEc:eee:labeco:v:5:y:1998:i:2:p:109-134
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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  1. Robert H. Meyer & David A. Wise, 1981. "Discontinuous Distributions and Missing Persons: The Minimum Wage and Unemployed Youth," NBER Working Papers 0711, National Bureau of Economic Research, Inc.
  2. Charles Brown & Curtis Gilroy & Andrew Kohen, 1982. "The Effect of the Minimum Wage on Employment and Unemployment: A Survey," NBER Working Papers 0846, National Bureau of Economic Research, Inc.
  3. McDonald, James B, 1984. "Some Generalized Functions for the Size Distribution of Income," Econometrica, Econometric Society, vol. 52(3), pages 647-63, May.
  4. Singh, S K & Maddala, G S, 1976. "A Function for Size Distribution of Incomes," Econometrica, Econometric Society, vol. 44(5), pages 963-70, September.
  5. Stephen Machin & Alan Manning, 1994. "The Effects of Minimum Wages on Wage Dispersion and Employment: Evidence from the U.K. Wages Councils," ILR Review, Cornell University, ILR School, vol. 47(2), pages 319-329, January.
  6. Van Soest, A. & Kapteyn, A., 1989. "The Impact Of Minimum Wage Regulations On Employment And The Wage Rate Distribution," Papers 8947, Tilburg - Center for Economic Research.
  7. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
  8. Richard Dickens & Stephen Machin & Alan Manning, 1994. "The Effects of Minimum Wages on Employment: Theory and Evidence from Britain," CEP Discussion Papers dp0183, Centre for Economic Performance, LSE.
  9. David Card & Alan Krueger, 1993. "Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania," Working Papers 694, Princeton University, Department of Economics, Industrial Relations Section..
  10. David Neumark & William Wascher, 1992. "Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws," ILR Review, Cornell University, ILR School, vol. 46(1), pages 55-81, October.
  11. Robert H. Meyer & David A. Wise, 1982. "The Effects of the Minimum Wage on the Employment and Earnings of Youth," NBER Working Papers 0849, National Bureau of Economic Research, Inc.
  12. 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.
  13. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," NBER Working Papers 4058, National Bureau of Economic Research, Inc.
  14. Kaufman, Roger T, 1989. "The Effects of Statutory Minimum Rates of Pay on Employment in Great Britain," Economic Journal, Royal Economic Society, vol. 99(398), pages 1040-53, December.
  15. Jean Baldwin Grossman, 1983. "The Impact of the Minimum Wage on Other Wages," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 359-378.
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