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The Heterogeneous Effects of Large and Small Minimum Wage Changes: Evidence over the Short and Medium Run Using a Pre-analysis Plan

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  • Clemens, Jeffrey

    (University of California, San Diego)

  • Strain, Michael R.

    (American Enterprise Institute for Public Policy Research)

Abstract

This paper advances the use of pre-analysis plans in non-experimental research settings. In a study of recent minimum wage changes, we demonstrate how analyses of medium- and long-run impacts of policy interventions can be pre-specified as extensions to short-run analyses. Further, our pre-analysis plan includes comparisons of the effects of large vs. small minimum wage increases, which is a theoretically motivated dimension of heterogeneity. We discuss how these use cases harness the strengths of pre-analysis plans while mitigating their weaknesses. This project's initial analyses explored CPS and ACS data from 2011 through 2015. Alongside these analyses, we pre-committed to analyses incorporating CPS and ACS data extending through 2019. Averaging across the specifications in our pre-analysis plan, we estimate that relatively large minimum wage increases reduced employment rates among low-skilled individuals by just over 2.5 percentage points. Our estimates of the effects of relatively small minimum wage increases vary across data sets and specifications but are, on average, both economically and statistically indistinguishable from zero. We estimate that medium-run effects exceed short-run effects and that the elasticity of employment with respect to the minimum wage is substantially more negative for large minimum wage increases than for small increases.

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  • Clemens, Jeffrey & Strain, Michael R., 2021. "The Heterogeneous Effects of Large and Small Minimum Wage Changes: Evidence over the Short and Medium Run Using a Pre-analysis Plan," IZA Discussion Papers 14747, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp14747
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    1. Bas Scheer & Wiljan van den Berge & Maarten Goos & Alan Manning & Anna Salomons, 2022. "Alternative Work Arrangements and Worker Outcomes: Evidence from Payrolling," CPB Discussion Paper 435, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Sebastian Link, 2019. "The Price and Employment Response of Firms to the Introduction of Minimum Wages," CESifo Working Paper Series 7575, CESifo.
    3. Adams, Camilla & Meer, Jonathan & Sloan, CarlyWill, 2022. "The minimum wage and search effort," Economics Letters, Elsevier, vol. 212(C).
    4. Perez Perez, Jorge, 2020. "City Minimum Wages and Spatial Equilibrium Effects," SocArXiv fpx9e, Center for Open Science.
    5. Priyaranjan Jha & David Neumark & Antonio Rodriguez-Lopez, 2022. "What's Across the Border? Re-Evaluating the Cross-Border Evidence on Minimum Wage Effects," CESifo Working Paper Series 9746, CESifo.
    6. Clemens, Jeffrey & Strain, Michael R., 2022. "Does measurement error explain the increase in subminimum wage payment following minimum wage increases?," Economics Letters, Elsevier, vol. 217(C).
    7. Clemens, Jeffrey & Strain, Michael R., 2022. "The Minimum Wage and Union Membership among Minimum Wage Workers: Why Do Unions Advocate for Minimum Wage Increases?," IZA Discussion Papers 15685, Institute of Labor Economics (IZA).
    8. Fillmore, Ian, 2022. "A $15 federal minimum wage is outside historical experience," Research in Economics, Elsevier, vol. 76(1), pages 84-92.
    9. David W. Berger & Kyle F. Herkenhoff & Simon Mongey, 2022. "Minimum Wages, Efficiency and Welfare," NBER Working Papers 29662, National Bureau of Economic Research, Inc.
    10. Aedin Doris & Donal O'Neill & Olive Sweetman, 2022. "The Introduction of a Living Wage in Ireland," Economics Department Working Paper Series n316-22.pdf, Department of Economics, National University of Ireland - Maynooth.
    11. Ash, Elliott & Cai, David & Draca, Mirko & Liu, Shaoyu, 2022. "Bootstrapping Science? The Impact of a “Return Human Capital” Programme on Chinese Research Productivity," The Warwick Economics Research Paper Series (TWERPS) 1416, University of Warwick, Department of Economics.
    12. Yim, Hyejin & Katare, Bhagyashree & Cuffey, Joel, 2022. "Does Increasing Minimum Wage Impact Service Quality? Evidence from Restaurant Food Safety Inspections," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322411, Agricultural and Applied Economics Association.
    13. Erik Hurst & Patrick J. Kehoe & Elena Pastorino & Thomas Winberry, 2022. "The Distributional Impact of the Minimum Wage in the Short and Long Run," NBER Working Papers 30294, National Bureau of Economic Research, Inc.
    14. Loukas Karabarbounis & Jeremy Lise & Anusha Nath, 2022. "Minimum Wages and Labor Markets in the Twin Cities," NBER Working Papers 30239, National Bureau of Economic Research, Inc.
    15. Skedinger, Per, 2022. "The Economics behind the Directive on Adequate Minimum Wages in the EU: A Critical Assessment," Working Paper Series 1438, Research Institute of Industrial Economics.
    16. Andrew Yizhou Liu, 2022. "The Minimum Wage And Occupational Mobility," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(2), pages 917-945, May.
    17. Jeffrey Clemens & Michael R. Strain, 2022. "How Important are Minimum Wage Increases in Increasing the Wages of Minimum Wage Workers?," NBER Working Papers 29824, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    minimum wages; employment; pre-commitment;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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