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Mandated Wage Floors and the Wage Structure: New Estimates of the Ripple Effects of Minimum Wage Laws

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  • Jeannette Wicks-Lim

Abstract

Minimum wage laws have become a key political issue, following on the heels of over 130 successful living wage campaigns around the country. In the debates surrounding these mandated wage floors, one recurring issue has been whether the legislation has wider-ranging impacts on wages than the legally-required raises alone. Advocates on both sides of the debate dispute the potential magnitude of 'ripple effects'- the non-mandated raises given by employers to maintain a similar wage hierarchy before and after a change in the wage floor. These ripple effects have the potential to greatly expand the overall impact of mandated wage floors. This study uses data from twenty years of the Current Population Survey to assess the magnitude of ripple effects in the context of variations in minimum wage laws, and looks specifically at the retail trade sector to model the potential magnitude of ripple effects under living wage ordinances, where the 'bite' of the legislation would encompass a larger share of the workforce.

Suggested Citation

  • Jeannette Wicks-Lim, 2006. "Mandated Wage Floors and the Wage Structure: New Estimates of the Ripple Effects of Minimum Wage Laws," Working Papers wp116, Political Economy Research Institute, University of Massachusetts at Amherst.
  • Handle: RePEc:uma:periwp:wp116
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    File URL: https://www.peri.umass.edu/fileadmin/pdf/WP116.pdf
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    References listed on IDEAS

    as
    1. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, January.
    2. David Neumark & DMark Schweitzer & DaWilliam Wascher, 2004. "Minimum Wage Effects throughout the Wage Distribution," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
    3. Robert Pollin, 2003. "Testimony on Proposed Santa Fe, New Mexico Living Wage Ordinance," Research Reports rr6, Political Economy Research Institute, University of Massachusetts at Amherst.
    4. Jeannette Wicks-Lim & Mark D. Brenner & Robert Pollin, 2004. "Economic Analysis of the Florida Minimum Wage Proposal," Published Studies ps17, Political Economy Research Institute, University of Massachusetts at Amherst.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    ripple effect; wage spillover; wage norms; minimum wage; living wage; wage distribution; retail trade; low wage;

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • 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
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy

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