Minimum Wages in Puerto Rico: Textbook Case of a Wage Floor?
This paper uses time series and cross-industry data on employment and wages in Puerto Rico to assess the effects of applying the U.S. minimum wage to the Puerto Rican labor market. We find that the U.S. minimum has a massive effect on the earnings distribution in Puerto Rico and that it has substantially lowered employment and altered the allocation of labor across industries. The reduction in employment is due to the fact that the minimum has a high level relative to average earnings or productivity, not to an especially high estimated elasticity of employment to the minimum. We claim that the results support the textbook model of the minimum wage more strongly than studies of the minimum in the U.S. because in Puerto Rico the U.S. minimum has "real bite."
|Date of creation:||Jun 1991|
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- Brown, Charles, 1988. "Minimum Wage Laws: Are They Overrated?," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 133-145, Summer.
- Charles Brown & Curtis Gilroy & Andrew Kohen, 1983.
"Time-Series Evidence of the Effect of the Minimum Wage on Youth Employment and Unemployment,"
Journal of Human Resources,
University of Wisconsin Press, vol. 18(1), pages 3-31.
- Charles Brown & Curtis Gilroy & Andrew Kohen, 1981. "Time-Series Evidence of the Effect of the Minimum Wage on Youth Employment and Unemployment," NBER Working Papers 0790, National Bureau of Economic Research, Inc.