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The Highs and Lows of the Minimum Wage Effect: A Time-Series Cross-Section Study of the Canadian Law

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  • Baker, Michael
  • Benjamin, Dwayne
  • Stanger, Shuchita

Abstract

The authors examine the effects of minimum wage legislation in Canada over the period 1975-93. For teenagers we find that a 10 percent increase in the minimum wage is associated with roughly a 2.5 percent decrease in employment. They also find that this result is driven by low frequency variation in the data. At high frequencies the elasticity is positive and insignificant. The difference in the elasticity across the bandwidth has implications for the interpretation of employment dynamics as a result of minimum wage policy and experimental design in minimum wage studies. It also provides a simple reconciliation of the 'new minimum wage research,' which reports very small negative, or positive, elasticities. Copyright 1999 by University of Chicago Press.

Suggested Citation

  • Baker, Michael & Benjamin, Dwayne & Stanger, Shuchita, 1999. "The Highs and Lows of the Minimum Wage Effect: A Time-Series Cross-Section Study of the Canadian Law," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 318-350, April.
    • Handle: RePEc:ucp:jlabec:v:17:y:1999:i:2:p:318-50
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    References listed on IDEAS

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    1. Alison J. Wellington, 1991. "Effects of the Minimum Wage on the Employment Status of Youths: An Update," Journal of Human Resources, University of Wisconsin Press, vol. 26(1), pages 27-46.
    2. Janet Currie & Bruce C. Fallick, 1996. "The Minimum Wage and the Employment of Youth Evidence from the NLSY," Journal of Human Resources, University of Wisconsin Press, vol. 31(2), pages 404-428.
    3. Robert Swidinsky, 1980. "Minimum Wages and Teenage Unemployment," Canadian Journal of Economics, Canadian Economics Association, vol. 13(1), pages 158-171, February.
    4. Matthew D. Shapiro, 1986. "The Dynamic Demand for Capital and Labor," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 513-542.
    5. Joseph Schaafsma & William D. Walsh, 1983. "Employment and Labour Supply Effects of the Minimum Wage: Some Pooled Time-Series Estimates from Canadian Provincial Data," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 86-97, February.
    6. MacKinnon, James G. & White, Halbert & Davidson, Russell, 1983. "Tests for model specification in the presence of alternative hypotheses : Some further results," Journal of Econometrics, Elsevier, vol. 21(1), pages 53-70, January.
    7. Meese, Richard, 1980. "Dynamic factor demand schedules for labor and capital under rational expectations," Journal of Econometrics, Elsevier, vol. 14(1), pages 141-158, September.
    8. 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.
    9. Heckman, J.J. & Hotz, V.J., 1988. "Choosing Among Alternative Nonexperimental Methods For Estimating The Impact Of Social Programs: The Case Of Manpower Training," University of Chicago - Economics Research Center 88-12, Chicago - Economics Research Center.
    10. Engle, Robert F, 1974. "Band Spectrum Regression," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(1), pages 1-11, February.
    11. Brown, Charles, 1988. "Minimum Wage Laws: Are They Overrated?," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 133-145, Summer.
    12. Sargent, Thomas J, 1978. "Estimation of Dynamic Labor Demand Schedules under Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1009-1044, December.
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