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On the Robustness of Minimum Wage Effects: Geographically-Disparate Trends and Job Growth Equations

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  • Addison, John T.

    (University of South Carolina)

  • Blackburn, McKinley L.

    (University of South Carolina)

  • Cotti, Chad

    (University of Wisconsin, Oshkosh)

Abstract

Just as the standard two-way fixed effects model for estimating the impact of minimum wages on employment has been sharply criticized for its neglect of spatial heterogeneity so, too, have the latest models been attacked for their uncritical use of state- or county-specific linear trends (and other spatial counterfactuals). Further attenuation of the effects of policy is also alleged to obtain in such circumstances where the true effect of minimum wages is upon employment growth rather than levels. This paper investigates whether such considerations call into question our earlier findings of statistically insignificant employment effects for an archetypal low-wage sector. We report that a continued focus on employment levels is indicated and that while experimentation with nonlinear trends may be productive their use is unlikely to dislodge the finding of considerably reduced negative employment effects.

Suggested Citation

  • Addison, John T. & Blackburn, McKinley L. & Cotti, Chad, 2014. "On the Robustness of Minimum Wage Effects: Geographically-Disparate Trends and Job Growth Equations," IZA Discussion Papers 8420, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp8420
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    References listed on IDEAS

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    1. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, September.
    2. John T. Addison & McKinley L. Blackburn & Chad D. Cotti, 2012. "The Effect of Minimum Wages on Labour Market Outcomes: County-Level Estimates from the Restaurant-and-Bar Sector," British Journal of Industrial Relations, London School of Economics, vol. 50(3), pages 412-435, September.
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    6. 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.
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    10. 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.
    11. Arindrajit Dube & T. William Lester & Michael Reich, 2016. "Minimum Wage Shocks, Employment Flows, and Labor Market Frictions," Journal of Labor Economics, University of Chicago Press, vol. 34(3), pages 663-704.
    12. Addison, John T. & Blackburn, McKinley L. & Cotti, Chad D., 2009. "Do minimum wages raise employment? Evidence from the U.S. retail-trade sector," Labour Economics, Elsevier, vol. 16(4), pages 397-408, August.
    13. Dale Belman & Paul J. Wolfson, 2014. "What Does the Minimum Wage Do?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wdmwd, july-dece.
    14. Joseph Sabia, 2009. "The Effects of Minimum Wage Increases on Retail Employment and Hours: New Evidence from Monthly CPS Data," Journal of Labor Research, Springer, vol. 30(1), pages 75-97, March.
    15. Dube, Arindrajit, 2013. "Minimum Wages and Aggregate Job Growth: Causal Effect or Statistical Artifact?," IZA Discussion Papers 7674, Institute of Labor Economics (IZA).
    16. Cogley, Timothy & Nason, James M., 1995. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 253-278.
    17. David Neumark & J.M. Ian Salas & William Wascher, 2013. "Revisiting the Minimum Wage-Employment Debate: Throwing Out the Baby with the Bathwater?," NBER Working Papers 18681, National Bureau of Economic Research, Inc.
    18. Sylvia Allegretto & Arindrajit Dube & Michael Reich & Ben Zipperer, 2017. "Credible Research Designs for Minimum Wage Studies," ILR Review, Cornell University, ILR School, vol. 70(3), pages 559-592, May.
    19. 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.
    20. 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.
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    Cited by:

    1. Mario Bossler, 2017. "Employment expectations and uncertainties ahead of the new German minimum wage," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(4), pages 327-348, September.
    2. Mario Bossler & Hans-Dieter Gerner, 2020. "Employment Effects of the New German Minimum Wage: Evidence from Establishment-Level Microdata," ILR Review, Cornell University, ILR School, vol. 73(5), pages 1070-1094, October.
    3. Xu, Lei & Zhu, Yu, 2022. "Does the Employment Effect of National Minimum Wage Vary by Non-employment Rate? A Regression Discontinuity Approach," IZA Discussion Papers 15345, Institute of Labor Economics (IZA).
    4. Bossler, Mario & Gürtzgen, Nicole & Lochner, Benjamin & Betzl, Ute & Feist, Lisa & Wegmann, Jakob, 2018. "Auswirkungen des gesetzlichen Mindestlohns auf Betriebe und Unternehmen," IAB-Forschungsbericht 201804, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. Charles C. Brown & Daniel S. Hamermesh, 2019. "Wages and Hours Laws: What Do We Know? What Can Be Done?," NBER Working Papers 25942, National Bureau of Economic Research, Inc.
    6. Clémence Berson, 2016. "Local labor markets and taste-based discrimination," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-21, December.
    7. Lutz Bellmann & Mario Bossler & Hans-Dieter Gerner & Olaf Hübler, 2017. "Training and minimum wages: first evidence from the introduction of the minimum wage in Germany," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 6(1), pages 1-22, December.
    8. Garloff, Alfred, 2016. "Side effects of the new German minimum wage on (un-)employment : first evidence from regional data," IAB-Discussion Paper 201631, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    9. Bossler, Mario & Gürtzgen, Nicole & Lochner, Benjamin & Betzl, Ute & Feist, Lisa, 2018. "The German minimum wage: Effects on business expectations, profitability, and investments," FAU Discussion Papers in Economics 13/2018, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    10. Mario Bossler & Sandra Broszeit, 2017. "Do minimum wages increase job satisfaction? Micro-data evidence from the new German minimum wage," LABOUR, CEIS, vol. 31(4), pages 480-493, December.
    11. Bossler Mario & Gürtzgen Nicole & Betzl Ute & Feist Lisa & Lochner Benjamin, 2020. "The German Minimum Wage: Effects on Productivity, Profitability, and Investments," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 240(2-3), pages 321-350, April.
    12. Ekaterina Jardim & Mark C. Long & Robert Plotnick & Emma van Inwegen & Jacob Vigdor & Hilary Wething, 2017. "Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle," NBER Working Papers 23532, National Bureau of Economic Research, Inc.
    13. Bruce Kaufman, 2016. "Adam Smith’s Economics and the Modern Minimum Wage Debate:The Large Distance Separating Kirkcaldy from Chicago," Journal of Labor Research, Springer, vol. 37(1), pages 29-52, March.
    14. Kashif Mansoor & Donal O'Neill, 2020. "Minimum Wage Compliance and Household Welfare: An analysis of over 1500 Minimum Wages," Economics Department Working Paper Series n301-20.pdf, Department of Economics, National University of Ireland - Maynooth.
    15. 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.
    16. 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.
    17. David Neumark & Peter Shirley, 2021. "Myth or Measurement: What Does the New Minimum Wage Research Say about Minimum Wages and Job Loss in the United States?," NBER Working Papers 28388, National Bureau of Economic Research, Inc.
    18. Alfred Garloff, 2019. "Did the German Minimum Wage Reform Influence (Un)employment Growth in 2015? Evidence from Regional Data," German Economic Review, Verein für Socialpolitik, vol. 20(3), pages 356-381, August.
    19. Mansoor, Kashif & O'Neill, Donal, 2021. "Minimum wage compliance and household welfare: An analysis of over 1500 minimum wages in India," World Development, Elsevier, vol. 147(C).

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    More about this item

    Keywords

    employment change; employment; minimum wages; spatial controls;
    All these keywords.

    JEL classification:

    • 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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