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Are the Effects of Minimum Wage Increases Always Small? New Evidence from a Case Study of New York State

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  • Joseph J. Sabia
  • Richard V. Burkhauser
  • Benjamin Hansen

Abstract

The authors estimate the effect of the 2004–6 New York State (NYS) minimum wage increase from $5.15 to $6.75 per hour on the employment rates of 16- to 29-year-olds who do not have a high school diploma. Using data drawn from the 2004 and 2006 Current Population Survey, they employ difference-in-difference estimates to show that the NYS minimum wage increase is associated with a 20.2% to 21.8% reduction in the employment of less-skilled, less-educated workers, with the largest effects on those aged 16 to 24. Their estimates imply a median employment elasticity with respect to the minimum wage of around −0.7, large relative to previous researchers' estimates. The authors' findings are robust to their choice of geographically proximate comparison states, the use of a more highly skilled within-state comparison group, and a synthetic control design approach. Moreover, their results provide plausible evidence that state minimum wage increases can have substantial adverse labor demand effects for low-skilled individuals that are outside previous elasticity estimates, ranging from −0.1 to −0.3.

Suggested Citation

  • Joseph J. Sabia & Richard V. Burkhauser & Benjamin Hansen, 2012. "Are the Effects of Minimum Wage Increases Always Small? New Evidence from a Case Study of New York State," ILR Review, Cornell University, ILR School, vol. 65(2), pages 350-376, April.
  • Handle: RePEc:sae:ilrrev:v:65:y:2012:i:2:p:350-376
    DOI: 10.1177/001979391206500207
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