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The Effect of Minimum Wages Throughout the Wage Distribution

  • Neumark, D.
  • Schweitzer, M.
  • Wascher, W.

This paper provides evidence on a wide set of margins along which labor markets can adjust in response to increases in the minimum wage, including wages, hours, employment, and ultimately labor income, representing the central margins of adjustment that impact the economic well-being of workers potentially affected by minimum wage increases. The evidence indicates that workers initially earning near the minimum wage are adversely affected by minimum wage increases, while, not surprisingly, higher-wage workers are little affected. Although wages of low-wage workers increase, their hours and employment decline, and the combined effect of these changes is a decline in earned income. We also delve into the political economy of minimum wages, attempting to understand the vigorous support of labor unions for minimum wage increases. Using the same empirical framework, we find that relatively low-wage union members gain at the expense of the lowest-wage nonunion workers when minimum wages increase.

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Paper provided by London School of Economics - Centre for Labour Economics in its series Papers with number 9919.

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Length: 29 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:fth:lseple:9919
Contact details of provider: Postal: LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE, CENTER FOR LABOUR ECONOMICS, HOUGHTON STREET LONDON WC2A 2AE ENGLAND.
Phone: +44 (020) 7405 7686
Web page: http://www.lse.ac.uk/

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  1. David Neumark & Mark Schweitzer & William Wascher, 2005. "The Effects of Minimum Wages on the Distribution of Family Incomes: A Nonparametric Analysis," Journal of Human Resources, University of Wisconsin Press, vol. 40(4), pages 867-894.
  2. Jean Baldwin Grossman, 1983. "The Impact of the Minimum Wage on Other Wages," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 359-378.
  3. 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..
  4. Lang, Kevin & Kahn, Shulamit, 1998. "The effect of minimum-wage laws on the distribution of employment: theory and evidence," Journal of Public Economics, Elsevier, vol. 69(1), pages 67-82, July.
  5. Cox, James C & Oaxaca, Ronald L, 1982. "The Political Economy of Minimum Wage Legislation," Economic Inquiry, Western Economic Association International, vol. 20(4), pages 533-55, October.
  6. Neumark, David & Wascher, William, 1995. "Minimum-Wage Effects on School and Work Transitions of Teenagers," American Economic Review, American Economic Association, vol. 85(2), pages 244-49, May.
  7. Janet Currie & Bruce Fallick, 1993. "The Minimum Wage and the Employment of Youth: Evidence from the NLSY," NBER Working Papers 4348, National Bureau of Economic Research, Inc.
  8. Zavodny, Madeline, 2000. "The effect of the minimum wage on employment and hours," Labour Economics, Elsevier, vol. 7(6), pages 729-750, November.
  9. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
  10. Abowd, John M & Kramarz, Francis & Margolis, David N, 1999. "Minimum Wages and Employment in France and the United States," CEPR Discussion Papers 2159, C.E.P.R. Discussion Papers.
  11. Edward M. Gramlich, 1976. "Impact of Minimum Wages on Other Wages, Employment, and Family Incomes," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(2), pages 409-462.
  12. Linneman, Peter, 1982. "The Economic Impacts of Minimum Wage Laws: A New Look at an Old Question," Journal of Political Economy, University of Chicago Press, vol. 90(3), pages 443-69, June.
  13. 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 318-50, April.
  14. Victor R. Fuchs & Alan B. Krueger & James M. Poterba, 1998. "Economists' Views about Parameters, Values, and Policies: Survey Results in Labor and Public Economics," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1387-1425, September.
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