Article

Implications of schedule irregularity as a minimum wage response margin

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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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This paper discusses non-employment margins through which firms may respond to minimum wage increases. Margins of interest include evasion, output prices, noncash compensation, job attributes including effort requirements, the firm’s mix of low- and high-skilled labor, and the firm’s mix of labor and capital. I discuss the basic theory behind each margin’s potential importance as well as findings from empirical research on their real-world relevance. Additionally, I present a set of pedagogical diagrams that show how supply and demand analyses of labor markets can be extended to bring additional nuances of real-world markets into the classroom.
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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 $15 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 $9 and $11. (JEL classification: J23, J31, J80)
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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 dataset from a chain of fashion retail stores, we estimate that a $1 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.
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We examine worker effort as a potential margin of adjustment to a minimum wage hike using unique data on piece rate workers who perform a homogenous task and whose individual output is rigorously recorded. By employing a difference-in-differences strategy that exploits the increase in Florida’s minimum wage from $6.79 to $7.21 on January 1, 2009, and worker location on the pre-2009 productivity distribution, we provide evidence consistent with incumbent workers’ positive effort responses.
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We employ a discrete choice experiment in the employment process for a national call center to estimate the willingness to pay distribution for alternative work arrangements relative to traditional office positions. Most workers are not willing to pay for scheduling flexibility, though a tail of workers with high valuations allows for sizable compensating differentials. The average worker is willing to give up 20 percent of wages to avoid a schedule set by an employer on short notice, and 8 percent for the option to work from home. We also document that many job-seekers are inattentive, and we account for this in estimation.
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This article exploits cross-state variation in minimum wages to investigate the impact of minimum wage changes on employer-provided health insurance. In contrast to the existing empirical literature, this article considers an environment where some firms are constrained by non-discrimination laws that govern the provision of health insurance. For these firms, minimum wage changes do not reduce the probability that workers will receive employer-provided health insurance. For firms not covered by the non-discrimination law, and free to tailor their fringe benefits, low-skilled workers experience a disproportionate reduction in the availability and generosity of health insurance after a minimum wage increase.
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Economists generally agree that the effect of a binding minimum wage law is to move firms backward along the demand curve for low skill workers. However, this prediction of worker displacement depends critically on the assumption that the productivity of firms' labor is not dependent on the wage. In this paper we show that in a conventional efficiency wage model, a minimum wage may increase the level of employment in low wage jobs. The formal logic of our model is similar to the case of labor demand under monopsony, but arises in a model with a large number of employers.
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This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection as well as empirical evidence on the effects of patent rights. Then, the second part considers the international aspects of IPR protection. In summary, this paper draws the following conclusions from the literature. Firstly, different patent policy instruments have different effects on R&D and growth. Secondly, there is empirical evidence supporting a positive relationship between IPR protection and innovation, but the evidence is stronger for developed countries than for developing countries. Thirdly, the optimal level of IPR protection should tradeoff the social benefits of enhanced innovation against the social costs of multiple distortions and income inequality. Finally, in an open economy, achieving the globally optimal level of protection requires an international coordination (rather than the harmonization) of IPR protection.
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