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Why Does the Minimum Wage Have No Discernible Effect on Employment?

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  • John Schmitt

Abstract

The employment effect of the minimum wage is one of the most studied topics in all of economics. This report examines the most recent wave of this research – roughly since 2000 – to determine the best current estimates of the impact of increases in the minimum wage on the employment prospects of low-wage workers. The weight of that evidence points to little or no employment response to modest increases in the minimum wage.

Suggested Citation

  • John Schmitt, 2013. "Why Does the Minimum Wage Have No Discernible Effect on Employment?," CEPR Reports and Issue Briefs 2013-04, Center for Economic and Policy Research (CEPR).
  • Handle: RePEc:epo:papers:2013-04
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    File URL: http://www.cepr.net/documents/publications/min-wage-2013-02.pdf
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    References listed on IDEAS

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    1. Sara Lemos, 2008. "A Survey Of The Effects Of The Minimum Wage On Prices," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 187-212, February.
    2. Laura Giuliano, 2013. "Minimum Wage Effects on Employment, Substitution, and the Teenage Labor Supply: Evidence from Personnel Data," Journal of Labor Economics, University of Chicago Press, vol. 31(1), pages 155-194.
    3. 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.
    4. Anne Beeson Royalty, 2000. "Do Minimum Wage Increases Lower the Probability that Low-Skilled Workers Will Receive Fringe Benefits?," JCPR Working Papers 172, Northwestern University/University of Chicago Joint Center for Poverty Research.
    5. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    6. Allegretto, Sylvia & Dube, Arindrajit & Reich, Michael, 2010. "Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data," Institute for Research on Labor and Employment, Working Paper Series qt7jq2q3j8, Institute of Industrial Relations, UC Berkeley.
    7. 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.
    8. John T. Addison & McKinleyl Blackburn, 1999. "Minimum Wages and Poverty," ILR Review, Cornell University, ILR School, vol. 52(3), pages 393-409, April.
    9. Sylvia A. Allegretto & Arindrajit Dube & Michael Reich, 2011. "Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 50(2), pages 205-240, April.
    10. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027.
    11. Joseph J. Sabia & Richard V. Burkhauser & Benjamin Hansen, 2012. "Are the Effects of Minimum Wage Increases Always Small? New Evidence from a Case Study of New York State," ILR Review, Cornell University, ILR School, vol. 65(2), pages 350-376, April.
    12. Thomas R. Michl, 2000. "Can Rescheduling Explain the New Jersey Minimum Wage Studies?," Eastern Economic Journal, Eastern Economic Association, vol. 26(3), pages 265-276, Summer.
    13. Mirko Draca & Stephen Machin & John Van Reenen, 2011. "Minimum Wages and Firm Profitability," American Economic Journal: Applied Economics, American Economic Association, vol. 3(1), pages 129-151, January.
    14. Walter J. Wessels, 1987. "Minimum Wages, Fringe Benefits, and Working Conditions," Books, American Enterprise Institute, number 917571, July.
    15. Hristos Doucouliagos & T. D. Stanley, 2009. "Publication Selection Bias in Minimum-Wage Research? A Meta-Regression Analysis," British Journal of Industrial Relations, London School of Economics, vol. 47(2), pages 406-428, June.
    16. Kosali Ilayperuma Simon & Robert Kaestner, 2003. "Do Minimum Wages Affect Non-wage Job Attributes? Evidence on Fringe Benefits and Working Conditions," NBER Working Papers 9688, National Bureau of Economic Research, Inc.
    17. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
    18. William Wascher & David Neumark, 2000. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Comment," American Economic Review, American Economic Association, vol. 90(5), pages 1362-1396, December.
    19. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    20. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
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    Citations

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    Cited by:

    1. Haroon Bhorat & Ravi Kanbur & Benjamin Stanwix, 2017. "Minimum Wages in Sub-Saharan Africa: A Primer," World Bank Research Observer, World Bank Group, vol. 32(1), pages 21-74.
    2. Luca Agnello & Nikola Altiparmakov & Michal Andrle & Maria Grazia Attinasi & Jan Babecký & Salvador Barrios & John Bluedorn & Vladimir Borgy & Othman Bouabdallah & Andries Brandsma & Adi Brender & Vít, 2016. "Beyond the austerity dispute: new priorities for fiscal policy," Workshop and Conferences 20, Bank of Italy, Economic Research and International Relations Area.
    3. Jonathan Meer & Jeremy West, 2016. "Effects of the Minimum Wage on Employment Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 51(2), pages 500-522.
    4. Bravo, Jaime, 2013. "Cómo El Paradigma Económico No Da Respuesta a Los Países En Vías De Desarrollo
      [How the Economic Paradigm Does Not Fit Developing Countries]
      ," MPRA Paper 52077, University Library of Munich, Germany, revised 20 Aug 2014.
    5. Baek, Jisun & Park, WooRam, 2016. "Minimum wage introduction and employment: Evidence from South Korea," Economics Letters, Elsevier, vol. 139(C), pages 18-21.
    6. Patrick Belser & Uma Rani, 2015. "Minimum wages and inequality," Chapters,in: Labour Markets, Institutions and Inequality, chapter 5, pages 123-146 Edward Elgar Publishing.
    7. Manning, Alan, 2016. "The elusive employment effect of the minimum wage," LSE Research Online Documents on Economics 67646, London School of Economics and Political Science, LSE Library.
    8. Haroon Bhorat & Tara Caetano & Benjamin Jourdan & Ravi Kanbur & Christopher Rooney & Benjamin Stanwix & Ingrid Woolard, 2016. "Investigating the Feasibility of a National Minimum Wage for South Africa," Working Papers 201601, University of Cape Town, Development Policy Research Unit.
    9. Katalin Bodnár & Ludmila Fadejeva & Stefania Iordache & Liina Malk & Desislava Paskaleva & Jurga Pesliakaite & Nataša Todorovic Jemec & Peter Tóth & Robert Wyszynski, 2017. "How do firms adjust to rises in the minimum wage? Survey evidence from Central and Eastern Europe," Working and Discussion Papers WP 9/2017, Research Department, National Bank of Slovakia.
    10. Bruce G. Carruthers & Naomi R. Lamoreaux, 2016. "Regulatory Races: The Effects of Jurisdictional Competition on Regulatory Standards," Journal of Economic Literature, American Economic Association, vol. 54(1), pages 52-97, March.
    11. Vincent Geloso, 2016. "The Turnover-Reducing Effects of the Minimum Wage may Harm the Economy," Economic Affairs, Wiley Blackwell, vol. 36(3), pages 318-325, October.
    12. repec:eee:pubeco:v:153:y:2017:i:c:p:56-68 is not listed on IDEAS
    13. repec:nbr:nberch:14018 is not listed on IDEAS
    14. Anton Korinek & Joseph E. Stiglitz, 2018. "Artificial Intelligence and Its Implications for Income Distribution and Unemployment," NBER Chapters,in: The Economics of Artificial Intelligence: An Agenda National Bureau of Economic Research, Inc.
    15. repec:wfo:wstudy:60570 is not listed on IDEAS
    16. David Neumark, 2014. "Employment effects of minimum wages," IZA World of Labor, Institute for the Study of Labor (IZA), pages 1-6, May.

    More about this item

    Keywords

    minimum wage; labor; employment; inequality; poverty;

    JEL classification:

    • J - Labor and Demographic Economics
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • J8 - Labor and Demographic Economics - - Labor Standards
    • D - Microeconomics

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