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The Minimum Wage, Turnover, and the Shape of the Wage Distribution

Author

Listed:
  • Pierre R. Brochu
  • David A. Green
  • Thomas Lemieux
  • James H. Townsend

Abstract

This paper proposes an empirical approach to decompose the distributional effects of minimum wages into effects for workers moving out of employment, workers moving into employment, and workers continuing in employment. We estimate the effects of the minimum wage on the hazard rate for wages, which provides a convenient way of re-scaling the wage distribution to control for possible employment effects. We find that minimum wage increases do not result in an abnormal concentration of Job Leavers below the new minimum wage, which is inconsistent with employment effects predicted by a neoclassical model. We also find that, for Job Stayers, the spike and spillover effects of the minimum wage are simply shifted right to the new minimum wage. Our findings are consistent with a model where entry wages are set according to a job ladder, and where firms anchor their internal wage structure on the minimum wage due to fairness or internal incentives issues.

Suggested Citation

  • Pierre R. Brochu & David A. Green & Thomas Lemieux & James H. Townsend, 2025. "The Minimum Wage, Turnover, and the Shape of the Wage Distribution," NBER Working Papers 33479, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33479
    Note: LS
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    More about this item

    JEL classification:

    • 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

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