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The Effect of Minimum Wage Increases on Wages, Hours Worked and Job Loss

Author

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  • James Bishop

    (Reserve Bank of Australia)

Abstract

Australia has a detailed system of 'awards' that specifiy different minimum wages depending on the industry, location and skill of an employee. Using job-level data from a survey of firms, this paper examines the effect of award wage changes on wages, hours worked and the job destruction rate. I exploit the fact that between 1998 and 2008, award wages were increased by a flat dollar amount each year (say, 50 cents per hour), irrespective of existing award wage levels. This led to larger award wage rises in percentage terms for jobs whose award wages were relatively low, compared to those on higher award wages. I find that adjustments to awards are almost fully passed on to wages in award-reliant jobs. I find no evidence that these small, incremental increases in award wages have an adverse effect on hours worked or the job destruction rate.

Suggested Citation

  • James Bishop, 2018. "The Effect of Minimum Wage Increases on Wages, Hours Worked and Job Loss," RBA Research Discussion Papers rdp2018-06, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp2018-06
    as

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    References listed on IDEAS

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    1. Andrew Leigh, 2007. "Does Raising the Minimum Wage Help the Poor?," The Economic Record, The Economic Society of Australia, vol. 83(263), pages 432-445, December.
    2. repec:bla:ausecr:v:37:y:2004:i:2:p:166-172 is not listed on IDEAS
    3. Wang‐Sheng Lee & Sandy Suardi, 2011. "Minimum Wages and Employment: Reconsidering the Use of a Time Series Approach as an Evaluation Tool," British Journal of Industrial Relations, London School of Economics, vol. 49(Supplemen), pages 376-401, July.
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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.
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    Cited by:

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    2. Guyonne Kalb & Jordy Meekes, 2019. "Wage Growth Distribution and Decline among Individuals: 2001-2017," RBA Annual Conference Papers acp2019-03, Reserve Bank of Australia, revised Jul 2019.

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    Keywords

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    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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