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The Distributional Effects of Minimum Wages: Evidence from Linked Survey and Administrative Data

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  • Kevin Rinz
  • John Voorheis

Abstract

States and localities are increasingly experimenting with higher minimum wages in response to rising income inequality and stagnant economic mobility, but commonly used public datasets offer limited opportunities to evaluate the extent to which such changes affect earnings growth. We use administrative earnings data from the Social Security Administration linked to the Current Population Survey to overcome important limitations of public data and estimate effects of the minimum wage on growth incidence curves and income mobility profiles, providing insight into how cross-sectional effects of the minimum wage on earnings persist over time. Under both approaches, we find that raising the minimum wage increases earnings growth at the bottom of the distribution, and those effects persist and indeed grow in magnitude over several years. This finding is robust to a variety of specifications, including alternatives commonly used in the literature on employment effects of the minimum wage. Instrumental variables and subsample analyses indicate that geographic mobility likely contributes to the effects we identify. Extrapolating from our estimates suggests that a minimum wage increase comparable in magnitude to the increase experienced in Seattle between 2013 and 2016 would have blunted some, but not nearly all, of the worst income losses suffered at the bottom of the income distribution during the Great Recession.

Suggested Citation

  • Kevin Rinz & John Voorheis, 2018. "The Distributional Effects of Minimum Wages: Evidence from Linked Survey and Administrative Data," CARRA Working Papers 2018-02, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:cpaper:2018-02
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    File URL: https://www.census.gov/content/dam/Census/library/working-papers/2018/adrm/carra-wp-2018-02.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Dow, Wiiliam H & Godoey, Anna & Lowenstein, Christopher A & Reich, Michael, 2019. "Can Economic Policies Reduce Deaths of Despair? Working Paper #104-19," Institute for Research on Labor and Employment, Working Paper Series qt14f015df, Institute of Industrial Relations, UC Berkeley.
    3. Christian Awuku-Budu & Dirk van Duym, 2022. "Developing Statistics on the Distribution of State Personal Income: Methodology and Preliminary Results," BEA Working Papers 0197, Bureau of Economic Analysis.
    4. Christian Moser & Niklas Engbom, 2016. "Earnings Inequality and the Minimum Wage: Evidence from Brazil," 2016 Meeting Papers 72, Society for Economic Dynamics.
    5. Campos Vázquez, Raymundo Miguel & Rodas Milián, James Alexis, 2020. "El efecto faro del salario mínimo en la estructura salarial: evidencias para México," El Trimestre Económico, Fondo de Cultura Económica, vol. 87(345), pages 51-97, enero-mar.
    6. Piotr Dworczak & Scott Duke Kominers & Mohammad Akbarpour, 2021. "Redistribution Through Markets," Econometrica, Econometric Society, vol. 89(4), pages 1665-1698, July.
    7. Garcia-Louzao, Jose & Tarasonis, Linas, 2023. "Wage and Employment Impact of Minimum Wage: Evidence from Lithuania," Journal of Comparative Economics, Elsevier, vol. 51(2), pages 592-609.
    8. Yuji Mizushima & Haruko Noguchi, 2021. "Spillover effects of minimum wages on suicide mortality: Evidence from Japan," Working Papers 2105, Waseda University, Faculty of Political Science and Economics.
    9. William H. Dow & Anna Godøy & Christopher A. Lowenstein & Michael Reich, 2019. "Can Economic Policies Reduce Deaths of Despair?," NBER Working Papers 25787, National Bureau of Economic Research, Inc.
    10. Hilario Barcelata Chávez, 2023. "Masa salarial y distribución del ingreso subnacional en México," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 18(1), pages 1-26, Enero - M.
    11. Fahad Fahimullah & Yi Geng & Bradley Hardy & Daniel Muhammad & Jeffrey Wilkins, 2019. "Earnings, EITC, and Employment Responses to a $15 Minimum Wage: Will Low-Income Workers Be Better Off?," Economic Development Quarterly, , vol. 33(4), pages 331-350, November.
    12. Ekaterina Jardim & Mark C. Long & Robert Plotnick & Emma van Inwegen & Jacob Vigdor & Hilary Wething, 2018. "Minimum Wage Increases and Individual Employment Trajectories," NBER Working Papers 25182, National Bureau of Economic Research, Inc.
    13. David Neumark & Peter Shirley, 2022. "Myth or measurement: What does the new minimum wage research say about minimum wages and job loss in the United States?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 61(4), pages 384-417, October.
    14. Dow, William H. & Godøy, Anna & Lowenstein, Christopher & Reich, Michael, 2020. "Can Labor Market Policies Reduce Deaths of Despair?," Journal of Health Economics, Elsevier, vol. 74(C).

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