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The Effects of Minimum Wages on the Distribution of Family Incomes: A Non-Parametric Analysis

  • David Neumark
  • Mark Schweitzer
  • William Wascher

The primary goal of a national minimum wage floor is to raise the incomes of poor or near-poor families with members in the work force. However, estimates of employment effects of minimum wages tell us relatively little about whether minimum wages are likely to achieve this goal; even if the disemployment effects of minimum wages are modest, minimum wage increases could result in net income losses for poor and low-income families. In this paper, we present evidence on the effects of minimum wages on family incomes from matched March CPS surveys. Using non-parametric estimates of the distributions of family income relative to needs in states and years with an without minimum wage increases, we examine the effects of minimum wages on this distribution, and on the distribution of the changes in income that families experience. Although minimum wages do increase the incomes of some poor families, the evidence indicates that the overall effects are to increase the proportion of families that are poor and near-poor, and to decrease the proportion of families with incomes between 1.5 and 3 times the poverty level.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6536.

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Date of creation: Apr 1998
Date of revision:
Publication status: published as Journal of Human Resources, Vol. 40, no. 4 (Autumn 2005): 867-894
Handle: RePEc:nbr:nberwo:6536
Note: LS
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  1. Nidardo, J. & Fortin, N. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Papers 93-94-15, California Irvine - School of Social Sciences.
  2. 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.
  3. John T. Addison & McKinleyl Blackburn, 1999. "Minimum Wages and Poverty," ILR Review, Cornell University, ILR School, vol. 52(3), pages 393-409, April.
  4. Johnson, William R & Browning, Edgar K, 1983. "The Distributional and Efficiency Effects of Increasing the Minimum Wage: A Simulation," American Economic Review, American Economic Association, vol. 73(1), pages 204-11, March.
  5. David Neumark & William Wascher, 1997. "Do Minimum Wages Fight Poverty?," NBER Working Papers 6127, National Bureau of Economic Research, Inc.
  6. Hashimoto, Masanori, 1982. "Minimum Wage Effects on Training on the Job," American Economic Review, American Economic Association, vol. 72(5), pages 1070-87, December.
  7. Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-49, May.
  8. David Neumark & William L. Wascher, 1995. "Reconciling the evidence on employment effects of minimum wages: a review of our research findings," Finance and Economics Discussion Series 95-53, Board of Governors of the Federal Reserve System (U.S.).
  9. 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.
  10. Daniel S. Hamermesh, 1993. "Labor Demand and the Source of Adjustment Costs," NBER Working Papers 4394, National Bureau of Economic Research, Inc.
  11. Richard V. Burkhauser & T. Aldrich Finegan, 1989. "The minimum wage and the poor: The end of a relationship," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(1), pages 53-71.
  12. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," Working Papers 680, Princeton University, Department of Economics, Industrial Relations Section..
  13. Jean Baldwin Grossman, 1983. "The Impact of the Minimum Wage on Other Wages," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 359-378.
  14. Jonah B. Gelbach, 2004. "Migration, the Life Cycle, and State Benefits: How Low Is the Bottom?," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 1091-1130, October.
  15. David Neumark & William Wascher, 1995. "The Effects of Minimum Wages on Teenage Employment and Enrollment: Evidence from Matched CPS Surveys," NBER Working Papers 5092, National Bureau of Economic Research, Inc.
  16. Edward M. Gramlich, 1976. "Impact of Minimum Wages on Other Wages, Employment, and Family Incomes," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(2), pages 409-462.
  17. Richard V. Burkhauser & Kenneth A. Couch & David C. Wittenburg, 1996. "Who gets what from minimum wage hikes: A re-estimation of Card and Krueger's distributional analysis in "Myth and Measurement: The New Economics of the Minimum Wage."," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 49(3), pages 547-552, April.
  18. Baker, Michael & Benjamin, Dwayne & Stanger, Shuchita, 1999. "The Highs and Lows of the Minimum Wage Effect: A Time-Series Cross-Section Study of the Canadian Law," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 318-50, April.
  19. repec:cup:etheor:v:8:y:1992:i:4:p:476-88 is not listed on IDEAS
  20. Marron, J.S. & Schmitz, H.-P., 1992. "Simultaneous Density Estimation of Several Income Distributions," Econometric Theory, Cambridge University Press, vol. 8(04), pages 476-488, December.
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