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More Than Just Numbers: Assessing the Real Impact of Minimum Wage Increases on Childcare Labor Markets

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  • Franco, Rodrigo

Abstract

This paper investigates the causal effects of minimum wage changes on the childcare labor market, a sector often characterized by low wages. Leveraging a difference-in-differences approach, I estimated treatment effects using two-way fixed effects and Callaway and Sant’Anna estimators. This research analyzes the causal impact of minimum wage law changes on earnings, employment, and turnover within childcare centers. The results underline a statistically significant 3% increase in the logarithm of earnings, indicating a strong causal relationship between minimum wage increase and earnings. However, the impacts on employment and turnover, while negative, are not statistically significant. These findings provide an insightful understanding of the labor dynamics in the childcare industry and suggest a potential model of perfect competition with search frictions and mobility costs. The pre-trend assumption in each case is validated by a dynamic model, strengthening the causal inference from the results. By dissecting the intricate causal relationship between wages and childcare quality, this research contributes to the broader discourse on minimum wage policies. It invites a reevaluation of wage structures in sectors like childcare, where the quality of service is directly linked to labor conditions.

Suggested Citation

  • Franco, Rodrigo, 2023. "More Than Just Numbers: Assessing the Real Impact of Minimum Wage Increases on Childcare Labor Markets," Master's Theses and Plan B Papers 338175, University of Minnesota, Department of Applied Economics.
    • Handle: RePEc:ags:umapmt:338175
    DOI: 10.22004/ag.econ.338175
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    References listed on IDEAS

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