Article

Implications of schedule irregularity as a minimum wage response margin

Taylor & Francis
Applied Economics Letters
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Abstract

Empirical research on minimum wages has historically focused on employment effects, with the implicit assumption that workers who remain employed under a minimum wage regime are better off. This paper develops a simple model and a stylized example to highlight the importance of an underappreciated margin: how a minimum wage might affect the regularity of workers’ schedules. Our analysis illustrates a novel line of intuition for how a minimum wage can reduce welfare even if, as in our example, it increases wages, productivity, and output, without decreasing employment.

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... In the similar line, Clemens et al. (2018) show that an increase in the minimum wage leads to a decline in employer sponsored health coverage, which can have direct, negative consequences on children's achievement. Further, firms may respond to a rise in the minimum wage by introducing more inflexible schedules and by exacting more efforts from workers ( Strain and Clemens, 2019 ), in order to improve the marginal product of labor to offset the rise in the marginal cost of production. Such responses by firms to a minimum wage hike make the minimum-wage jobs both "physically and psychologically " challenging, leading workers to burn out more and reducing their work-life balance. ...
... This is to balance the increase in the marginal costs of production that are attributable to a minimum wage increase. Firms may alter the work schedules of their employees, making them more irregular and base workers' schedules on call-ups (see Strain and Clemens, 2019 for further discussion). Such responses by firms to a minimum wage hike make the minimum-wage jobs both "physically and psychologically " challenging, leading workers to burn out more and reducing their work-life balance. ...
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At the center of the minimum wage debate is its role in improving the welfare of low-income families. However, there is little empirical evidence of whether minimum wage changes actually affect those families’ children. This paper examines the effect of the minimum wage on the math and reading achievement levels of children with low socioeconomic status whose parents are most likely to be affected by the minimum wage, comparing with children in households with high socioeconomic status. Estimates show that a $1 minimum wage increase reduces children’s math and reading scores by approximately 0.10-0.19 standard deviations. Further, there is evidence that increases in the minimum wage lead to deterioration in the home environment, which may be one potential mechanism underlying my main findings.
... While workplace amenities clearly matter, there is little research on the responsiveness of amenities to minimum wage changes. Clemens and Strain (2020a) provide an illustrative example, whereby minimum wage increases can result in shifts away from worker-driven schedules and towards employer-driven schedules. Employer-driven schedules can generate higher output per hour if, for example, they enable firms to dismiss workers during slack shifts. ...
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Problem definition: The effect of the minimum wage is an important yet controversial topic that has received attention for decades. Our study is the first to take an operational lens and empirically study the impact of the minimum wage on firms’ scheduling practices. Methodology/results: Using a highly granular data set from a chain of fashion retail stores, we estimate that a 1increaseintheminimumwage,althoughhavinganegligibleimpactonthetotallaborhoursusedbythestores,leadstoa27.71 increase in the minimum wage, although having a negligible impact on the total labor hours used by the stores, leads to a 27.7% increase in the number of workers scheduled per week, but a 19.4% reduction in weekly hours per worker. For an average store in California, these changes translate into four extra workers and five fewer hours per worker per week. Such scheduling adjustment not only reduces the total wage compensation per worker but also reduces workers’ eligibility for benefits. We also show that the minimum wage increase reduces the consistency of weekly and daily schedules for workers. For example, the absolute (relative) deviation in weekly hours worked by each worker increases by up to 32.9% (6.6%) and by up to 9.7% (2.1%) in daily hours, as the minimum wage increases by 1. Managerial implications: Our study empirically identifies and highlights a new operational mechanism through which increasing the minimum wage may negatively impact worker welfare. Our further analysis suggests that the combination of the reduced hours, lower eligibility for benefits, and less consistent schedules (that resulted from the minimum wage increase) may substantially hurt worker welfare, even when the overall employment at the stores stay unchanged. By better understanding the intrinsic tradeoff of firms’ scheduling decisions, policy makers can better design minimum wage policies that will truly benefit workers. Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2023.1212 .
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Many economists and policymakers implicitly assume that “previous, modest increases in the minimum wage” are informative about the effects of a 15minimum.Economictheorypredictsthattheemploymenteffectsoftheminimumwageshouldvarywiththecompositionofaffectedoccupationsandindustries.Ifindthata15 minimum. Economic theory predicts that the employment effects of the minimum wage should vary with the composition of affected occupations and industries. I find that a 15 minimum would affect a far broader set of occupations and industries than prior increases, calling into question whether we can extrapolate from past experience with the minimum wage. I find that the frontier of historical experience is a federal minimum between 9and9 and 11. (JEL classification: J23, J31, J80)
Preprint
Full-text available
Problem definition: The effect of the minimum wage is an important yet controversial topic that has received attention for decades. Our study is the first to take an operational lens and empirically study the impact of the minimum wage on firms' scheduling practices. Methodology/results: Using a highly granular dataset from a chain of fashion retail stores, we estimate that a 1increaseintheminimumwage,whilehavinganegligibleimpactonthetotallaborhoursusedbythestores,leadstoa27.71 increase in the minimum wage, while having a negligible impact on the total labor hours used by the stores, leads to a 27.7% increase in the number of workers scheduled per week, but a 20.8% reduction in weekly hours per worker. For an average store in California, these changes translate into four extra workers and five fewer hours per worker per week. Such scheduling adjustment not only reduces the total wage compensation per worker but also reduces workers' eligibility for benefits. We also show that the minimum wage increase reduces the consistency of weekly and daily schedules for workers. For example, the absolute (relative) deviation in weekly hours worked by each worker increases by up to 33.0% (6.7%) and by up to 9.5% (2.0%) in daily hours, as the minimum wage increases by 1. Managerial implications: Our study empirically identifies and highlights a new operational mechanism through which increasing the minimum wage may negatively impact worker welfare. Our further analysis suggests that the combination of the reduced hours, lower eligibility for benefits, and less consistent schedules (that resulted from the minimum wage increase) may substantially hurt worker welfare, even when the overall employment at the stores stay unchanged. By better understanding the intrinsic trade-off of firms' scheduling decisions, policy makers can better design minimum wage policies that will truly benefit workers.
Chapter
One of the more troubling aspects of the ferment in macroeconomics that followed the demise of the Keynesian dominance in the late 1960s has been the inability of many of the new ideas to account for unemployment remains unexplained because equilibrium in most economic models occurs with supply equal to demand: if this equality holds in the labor market, there is no involuntary unemployment. Efficiency Wage Models of the Labor Market explores the reasons why there are labor market equilibria with employers preferring to pay wages in excess of the market-clearing wage and thereby explains involuntary unemployment. This volume brings together a number of the important articles on efficiency wage theory. The collection is preceded by a strong, integrative introduction, written by the editors, in which the hypothesis is set out and the variations, as described in subsequent chapters, are discussed.
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The Minimum Wage, Fringe Benefits, and Worker Welfare.” NBER WP 24635
  • J Clemens
  • L Kahn
  • J Meer
Do Minimum Wages Affect Nonwage Job Attributes? Evidence on Fringe Benefits
  • R Kaestner
  • K Simon