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


  • Franco, Rodrigo


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

    1. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
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    3. David Card, 1992. "Do Minimum Wages Reduce Employment? A Case Study of California, 1987–89," ILR Review, Cornell University, ILR School, vol. 46(1), pages 38-54, October.
    4. Carol Propper & John Van Reenen, 2010. "Can Pay Regulation Kill? Panel Data Evidence on the Effect of Labor Markets on Hospital Performance," Journal of Political Economy, University of Chicago Press, vol. 118(2), pages 222-273, April.
    5. David H. Autor & Alan Manning & Christopher L. Smith, 2016. "The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment," American Economic Journal: Applied Economics, American Economic Association, vol. 8(1), pages 58-99, January.
    6. Ermisch, John F, 1989. "Purchased Child Care, Optimal Family Size and Mother's Employment: Theory and Econometric Analysis," Journal of Population Economics, Springer;European Society for Population Economics, vol. 2(2), pages 79-102.
    7. Christopher J. Flinn, 2006. "Minimum Wage Effects on Labor Market Outcomes under Search, Matching, and Endogenous Contact Rates," Econometrica, Econometric Society, vol. 74(4), pages 1013-1062, July.
    8. Maria-Isabel Farfan-Portet & Vincent Lorant & Francesca Petrella, 2011. "Access to childcare services : the role of demand and supply-side policies," Post-Print halshs-00627517, HAL.
    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. Sara Lemos, 2004. "Minimum Wage Policy and Employment Effects: Evidence from Brazil," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2004), pages 219-266, August.
    11. Maria-Isabel Farfan-Portet & Vincent Lorant & Francesca Petrella, 2011. "Access to Childcare Services: The Role of Demand and Supply-Side Policies," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 30(2), pages 165-183, April.
    12. Herbst, Chris M., 2022. "Child Care in the United States: Markets, Policy, and Evidence," IZA Discussion Papers 15547, Institute of Labor Economics (IZA).
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