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State Minimum Wages, Employment, and Wage Spillovers: Evidence from Administrative Payroll Data

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  • Radhakrishnan Gopalan
  • Barton H. Hamilton
  • Ankit Kalda
  • David Sovich

Abstract

We use administrative payroll data to estimate the effect of the minimum wage on employment and wages. We find that both effects are nuanced. While the overall number of low-wage workers in firms declines, incumbent workers are no less likely to remain employed. We find that firms reduce employment primarily through hiring, and there is significant heterogeneity across the nontradable and tradable sectors. For wages, we find modest spillovers extending up to $2.50 above the minimum wage. Spillovers accrue to both incumbent workers and new hires, but only within firms that employ a significant fraction of low-wage workers.

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  • Radhakrishnan Gopalan & Barton H. Hamilton & Ankit Kalda & David Sovich, 2021. "State Minimum Wages, Employment, and Wage Spillovers: Evidence from Administrative Payroll Data," Journal of Labor Economics, University of Chicago Press, vol. 39(3), pages 673-707.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/711355
    DOI: 10.1086/711355
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    Cited by:

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    2. Sebastian Link, 2019. "The Price and Employment Response of Firms to the Introduction of Minimum Wages," CESifo Working Paper Series 7575, CESifo.
    3. Jose Garcia-Louzao & Linas Tarasonis, 2022. "Wage and employment impact of minimum wage: evidence from Lithuania," GRAPE Working Papers 75, GRAPE Group for Research in Applied Economics.
    4. Lennon, Conor & Teltser, Keith F. & Fernandez, Jose & Gohmann, Stephan, 2023. "How morality and efficiency shape public support for minimum wages," Journal of Economic Behavior & Organization, Elsevier, vol. 205(C), pages 618-637.
    5. Clemens, Jeffrey & Strain, Michael R., 2021. "The Heterogeneous Effects of Large and Small Minimum Wage Changes: Evidence over the Short and Medium Run Using a Pre-analysis Plan," IZA Discussion Papers 14747, Institute of Labor Economics (IZA).
    6. Ganserer, Angelika & Gregory, Terry & Zierahn, Ulrich, 2022. "Minimum wages and the rise in solo self-employment," ZEW Discussion Papers 22-024, ZEW - Leibniz Centre for European Economic Research.
    7. Adam Ayaita, 2022. "Does Money Change Who You Are? Quasi-Experimental Evidence on the Effects of Wage Increases on Personality," SOEPpapers on Multidisciplinary Panel Data Research 1170, DIW Berlin, The German Socio-Economic Panel (SOEP).
    8. Omberg Robert Tucker, 2021. "Puerto Rico's minimum wage: Revisiting a price floor with bite," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 11(1), pages 1-25, January.
    9. Bassier, Ihsaan, 2022. "Collective bargaining and spillovers in local labor markets," LSE Research Online Documents on Economics 118057, London School of Economics and Political Science, LSE Library.
    10. Demir, Gökay, 2022. "Labor market frictions and spillover effects from publicly announced sectoral minimum wages," Ruhr Economic Papers 985, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

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