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The Effects of Minimum Wages Throughout the Wage Distribution

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  • David Neumark
  • Mark Schweitzer
  • William Wascher

Abstract

This paper provides evidence on a wide set of margins along which labor markets can adjust in response to increases in the minimum wage, including wages, hours, employment, and ultimately labor income, representing the central margins of adjustment that impact the economic well-being of workers potentially affected by minimum wage increases. The evidence indicates that workers initially earning near the minimum wage are adversely affected by minimum wage increases, while, not surprisingly, higher-wage workers are little affected. Although wages of low-wage workers increase , their hours and employment decline, and the combined effect of these changes is a decline in earned income. We also delve into the political economy of minimum wages, attempting to understand the vigorous support of labor unions for minimum wage increases. Using the same empirical framework, we find that relatively low-wage union members gain at the expense of the lowest-wage nonunion workers when minimum wages increase.

Suggested Citation

  • David Neumark & Mark Schweitzer & William Wascher, 2000. "The Effects of Minimum Wages Throughout the Wage Distribution," NBER Working Papers 7519, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:7519
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    More about this item

    JEL classification:

    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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