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The Tail of Two Countries: Minimum Wages and Employment in France and the United States

Author

Listed:
  • Abowd, John M.

    () (Cornell University)

  • Kramarz, Francis

    () (CREST (ENSAE))

  • Margolis, David N.

    () (Paris School of Economics)

  • Philippon, Thomas

    () (New York University)

Abstract

We use longitudinal individual wage and employment data in France and the United States to investigate the effect of changes in the real minimum wage rate on an individual’s employment status. We focus on workers employed at wages close enough to the minimum in a reference year as to be illegal in an adjacent comparison year as a result of movements in the real minimum wage. We find that movements in the American real minimum wage are associated with no employment effects, whereas movements in the cost of French minimum wage workers are associated with very strong negative employment effects. Our analysis is based upon identifying the direct effect of the change in the real minimum wage rate on exits from (entry into) employment when the real minimum wage rate increases (respectively, decreases) and identifying the heterogeneity in the behavior of our treatment and control groups using a pseudo-experimental contrast. We relate the difference-in-difference estimator directly to demand and supply elasticities for the two groups.

Suggested Citation

  • Abowd, John M. & Kramarz, Francis & Margolis, David N. & Philippon, Thomas, 2000. "The Tail of Two Countries: Minimum Wages and Employment in France and the United States," IZA Discussion Papers 203, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp203
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    References listed on IDEAS

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    1. John M. Abowd & Francis Kramarz & Thomas Lemieux & David N. Margolis, 2000. "Minimum Wages and Youth Employment in France and the United States," NBER Chapters,in: Youth Employment and Joblessness in Advanced Countries, pages 427-472 National Bureau of Economic Research, Inc.
    2. 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.
    3. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
    4. Abowd, J.M. & Kramarz, F. & Margolis, D.N., 1998. "Minimum Wages and Employment in France and the United States," Papiers du Laboratoire de Microéconomie Appliquée 1998-12, Université Panthéon-Sorbonne (Paris 1).
    5. Brown, Charles, 1999. "Minimum wages, employment, and the distribution of income," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 32, pages 2101-2163 Elsevier.
    6. John M. Abowd & Patrick Corbel & Francis Kramarz, 1999. "The Entry And Exit Of Workers And The Growth Of Employment: An Analysis Of French Establishments," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 170-187, May.
    7. David Card & Alan B. Krueger, 1997. "A Reanalysis of the Effect of the New Jersey Minimum Wage Increase on the Fast-Food Industry with Representative Payroll Data," Working Papers 772, Princeton University, Department of Economics, Industrial Relations Section..
    8. 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.
    9. William J. Carrington & Bruce C. Fallick, 1999. "Minimum wage careers?," Finance and Economics Discussion Series 1999-46, Board of Governors of the Federal Reserve System (U.S.).
    10. Kramarz, Francis & Philippon, Thomas, 2001. "The impact of differential payroll tax subsidies on minimum wage employment," Journal of Public Economics, Elsevier, vol. 82(1), pages 115-146, October.
    11. David Margolis & Denis Fougère, 2000. "Moduler les cotisations employeurs à l'assurance-chômage : les expériences de bonus-malus aux Etats-Unis," Revue Française d'Économie, Programme National Persée, vol. 15(2), pages 3-76.
    12. David Neumark & William Wascher, 1992. "Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws," ILR Review, Cornell University, ILR School, vol. 46(1), pages 55-81, October.
    13. John M. Abowd & Michael Bognanno, 1995. "International Differences in Executive and Managerial Compensation," NBER Chapters,in: Differences and Changes in Wage Structures, pages 67-104 National Bureau of Economic Research, Inc.
    14. Welch, Finis, 1997. "Wages and Participation," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 77-103, January.
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    Citations

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    Cited by:

    1. Arulampalam, Wiji & Booth, Alison L. & Bryan, Mark L., 2003. "Work-related training and the new National Minimum Wage in Britain -ISER Working Paper-," ISER Working Paper Series 2003-05, Institute for Social and Economic Research.
    2. David Neumark & William Wascher, 2006. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research," NBER Working Papers 12663, National Bureau of Economic Research, Inc.
    3. Brown, Alessio J.G. & Merkl, Christian & Snower, Dennis J., 2014. "The minimum wage from a two-sided perspective," Economics Letters, Elsevier, vol. 124(3), pages 389-391.
    4. Gurgand, Marc & Margolis, David N., 2008. "Does work pay in France? Monetary incentives, hours constraints, and the guaranteed minimum income," Journal of Public Economics, Elsevier, vol. 92(7), pages 1669-1697, July.
    5. Buchinsky, Mosche & Fields, Gary S & Fougère, Denis & Kramarz, Francis, 2003. "Francs or Ranks? Earnings Mobility in France, 1967-1999," CEPR Discussion Papers 3937, C.E.P.R. Discussion Papers.
    6. Pedro Portugal & Ana Rute Cardoso, 2006. "Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 988-1013, September.
    7. Bodo Aretz & Melanie Arntz & Terry Gregory, 2013. "The Minimum Wage Affects Them All: Evidence on Employment Spillovers in the Roofing Sector," German Economic Review, Verein für Socialpolitik, vol. 14(3), pages 282-315, August.
    8. Sagiri Kitao & Lars Ljungqvist & Thomas Sargent, 2017. "A Life-Cycle Model of Trans-Atlantic Employment Experiences," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 320-349, April.
    9. Centeno, Mario & Duarte, Claudia & Novo, Alvaro A., 2014. "The Impact of the Minimum Wage on Match Stability," IZA Discussion Papers 8703, Institute for the Study of Labor (IZA).
    10. Kramarz, Francis & Philippon, Thomas, 2001. "The impact of differential payroll tax subsidies on minimum wage employment," Journal of Public Economics, Elsevier, vol. 82(1), pages 115-146, October.
    11. Mark Wooden, 2006. "Implications of Work Choices Legislation," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 13(2), pages 99-116.
    12. Bruno Crepon & Francis Kramarz, 2002. "Employed 40 Hours or Not Employed 39: Lessons from the 1982 Mandatory Reduction of the Workweek," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1355-1389, December.
    13. James J. Heckman & Carmen Pagés, 2004. "Law and Employment: Lessons from Latin America and the Caribbean," NBER Books, National Bureau of Economic Research, Inc, number heck04-1, June.
    14. Bruno Decreuse & Bertrand Wigniolle, 2006. "Schizophrénie intergénérationnelle," Recherches économiques de Louvain, De Boeck Université, vol. 72(1), pages 49-74.
    15. Arni, Patrick & Eichhorst, Werner & Pestel, Nico & Spermann, Alexander & Zimmermann, Klaus F., 2014. "Kein Mindestlohn ohne unabhängige wissenschaftliche Evaluation," IZA Standpunkte 65, Institute for the Study of Labor (IZA).
    16. Skedinger, Per, 2006. "Minimum wages and employment in Swedish hotels and restaurants," Labour Economics, Elsevier, vol. 13(2), pages 259-290, April.
    17. Jérôme Gautié & David Margolis, 2009. "Introduction," Économie et Statistique, Programme National Persée, vol. 429(1), pages 3-19.
    18. Skedinger, Per, 2007. "The Design and Effects of Collectively Agreed Minimum Wages: Evidence from Sweden," Working Paper Series 700, Research Institute of Industrial Economics.
    19. Mark B. Stewart, 2004. "The Impact of the Introduction of the U.K. Minimum Wage on the Employment Probabilities of Low-Wage Workers," Journal of the European Economic Association, MIT Press, vol. 2(1), pages 67-97, March.
    20. David Neumark, 2009. "Alternative Labor Market Policies to Increase Economic Self-Sufficiency: Mandating Higher Wages, Subsidizing Employment, and Increasing Productivity," NBER Working Papers 14807, National Bureau of Economic Research, Inc.
    21. Per Skedinger, 2010. "Sweden: A Minimum Wage Model in Need of Modification," Chapters,in: The Minimum Wage Revisited in the Enlarged EU, chapter 12 Edward Elgar Publishing.

    More about this item

    Keywords

    Minimum wage; international comparisons; labor demand; labor costs;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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