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Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Comment
... The original study employs the standard DiD estimator to conclude that the higher minimum wage led to increased employment in New Jersey restaurants. This result spawned much debate within the economics community about the effect of minimum wage policies on employment (e.g., Neumark and Wascher [61], Dube et al. [62], Meer and West [63], Neumark et al. [64], and the references therein). The treatment effect of interest in CK and many subsequent reevaluations is the change in full-time equivalent employees (FTE), which is defined via = + FTE FT 0.5PT , where FT (PT) is the number of fulltime (part-time) employees [61,65]. ...
... This result spawned much debate within the economics community about the effect of minimum wage policies on employment (e.g., Neumark and Wascher [61], Dube et al. [62], Meer and West [63], Neumark et al. [64], and the references therein). The treatment effect of interest in CK and many subsequent reevaluations is the change in full-time equivalent employees (FTE), which is defined via = + FTE FT 0.5PT , where FT (PT) is the number of fulltime (part-time) employees [61,65]. We use the proposed multivariate extension of the CiC estimator to estimate a bivariate treatment effect in terms of full-and part-time employees, hence fully dissecting the causal effect of raising the minimum wage on these subgroups. ...
... These partial observations could represent ambiguity in the classification of a worker as full-or part-time (Alan Krueger via interview reported in by Ehrenberg et al. [66]). As the restaurant employee responding to the phone interview was not necessarily the same at both measurements, Neumark and Wascher [61] argue, "there is no reason to believe that the responses in the first and second waves are based on the same 'definition' of employment." Therefore, these fractional observations can also be considered a degree of belief statement. ...
We propose a nonlinear difference-in-differences (DiD) method to estimate multivariate counterfactual distributions in classical treatment and control study designs with observational data. Our approach sheds a new light on existing approaches like the changes-in-changes estimator and the classical semiparametric DiD estimator, and it also generalizes them to settings with multivariate heterogeneity in the outcomes. The main benefit of this extension is that it allows for arbitrary dependence between the coordinates of vector potential outcomes and includes higher-dimensional unobservables, something that existing methods cannot provide in general. We demonstrate its utility on both synthetic and real data. In particular, we revisit the classical Card & Krueger dataset, which reports fast food restaurant employment before and after a minimum wage increase. A reanalysis with our methodology suggests that these restaurants substitute full-time labor with part-time labor on aggregate in response to a minimum wage increase. This treatment effect requires estimation of the multivariate counterfactual distribution, an object beyond the scope of classical causal estimators previously applied to this data.
... Subsequent empirical studies have reached widely divergent conclusions, with some studies finding that minimum wage laws do not negatively affect worker employment and even have some positive effects (Card, and Krueger, 1994;Machin and Manning, 1994;Sturn, 2017) [2][3][4]. There are also a number of studies find that minimum wage laws do not increase the income level of workers, but rather reduce employment (Neumark and Wascherr, 2000;Stephen and Marimoutou, 2003;Ding, 2010;Ma et al., 2012;Yuan and Yi, 2020; Neumarkand Corella，2021) [5][6][7][8][9][10]. According to standard economic common sense, the main factor that determines the employment of an enterprise is the productive capacity of the laborer, and the productive capacity of the laborer largely comes from the training of the enterprise, that is, the human capital investment of the enterprise. ...
... It also found little evidence that a minimum wage would have a substantial impact on unemployment among low-skilled, low-skilled women or young workers. However, Neumark and Wascher (2000) [5] re-collected similar data used by Card and Krueger (1994) [2] for empirical analysis, and their research showed that the increase in the minimum wage still reduced the number of employees in New Jersey restaurants. Bazen and Marimoutou (2002) [6] investigated time-series data over a longer period of the 1980s and 1990s, and found that rising minimum wages had a significant negative impact on employment after removing seasonal and trend factors. ...
... It also found little evidence that a minimum wage would have a substantial impact on unemployment among low-skilled, low-skilled women or young workers. However, Neumark and Wascher (2000) [5] re-collected similar data used by Card and Krueger (1994) [2] for empirical analysis, and their research showed that the increase in the minimum wage still reduced the number of employees in New Jersey restaurants. Bazen and Marimoutou (2002) [6] investigated time-series data over a longer period of the 1980s and 1990s, and found that rising minimum wages had a significant negative impact on employment after removing seasonal and trend factors. ...
Considerable debate has arisen around the potential effects of increasing the minimum wage on employment. This study aims to analyze the impact of changes in China's minimum wage standard on employment. The research utilises the canonical model method and constructs a regression model based on standard labor economics theory. The analysis is conducted using sample data from Chinese industrial enterprises between 2000 and 2007. Regression analysis is performed by categorizing enterprises based on their level of human capital investment. The findings indicate that minimum wage increases have a non-linear impact on employment, when seen from the standpoint of human capital investment. When the level of human capital investment is low, an increase in the minimum wage standard leads to a decrease in employment; when the level of human capital investment is high, an increase in the minimum wage standard leads to an increase in employment. According to the findings, the reason for this is that, investments in human capital can improve business profitability, increase worker marginal productivity, and increase labor demand. Similarly, the employment effect of a change in the minimum wage is positive in regions with high levels of human capital investment due to the externality effect of human capital. Adjustments to the minimum wage have a negative impact on employment in areas of the country with low levels of human capital investment. This demonstrates that changing the minimum wage does not result in a simple increase or decrease in total employment. The level of investment in human capital within the organization and the region is an important factor in determining the type and magnitude of the impact.
... A classical and influential example is the literature on the effect of minimum wage increases on employment [29,107]. To analyze the effect a minimum wage increase had on the employment growth rate at fast food chains in the state of New Jersey in 1992, David Card and Alan Krueger [29] used a difference-in-differences approach focusing on average effects; they compared the average change in the employment rate at the surveyed New Jersey fast-food restaurants to the average change of employment at fast-food restaurants in the neighboring Pennsylvania, where the minimum wage remained constant. ...
... Somewhat counterintuitively, they found that an increase in the minimum wage increased employment. In stark contrast, David Neumark and William Wascher [107], using a different dataset and different methodology, found a negative average effect. ...
The theory of optimal transportation has developed into a powerful and elegant framework for comparing probability distributions, with wide-ranging applications in all areas of science. The fundamental idea of analyzing probabilities by comparing their underlying state space naturally aligns with the core idea of causal inference, where understanding and quantifying counterfactual states is paramount. Despite this intuitive connection, explicit research at the intersection of optimal transport and causal inference is only beginning to develop. Yet, many foundational models in causal inference have implicitly relied on optimal transport principles for decades, without recognizing the underlying connection. Therefore, the goal of this review is to offer an introduction to the surprisingly deep existing connections between optimal transport and the identification of causal effects with observational data -- where optimal transport is not just a set of potential tools, but actually builds the foundation of model assumptions. As a result, this review is intended to unify the language and notation between different areas of statistics, mathematics, and econometrics, by pointing out these existing connections, and to explore novel problems and directions for future work in both areas derived from this realization.
... The dominant theory explaining the employment effects of minimum wage is the neoclassical wage approach, which asserts that increasing the minimum wage raises employer costs, reducing employment. Several Studies (see, for example, Holtemoller and Pohle (2020), Clemens (2015), Neumark and Wascher (2000), among others) concur with the neoclassical view that increasing minimum wage can lead to negative employment effects. ...
... Card and Krueger (1994), on the other hand, compared employment growth at fast-food outlets in New Jersey and Pennsylvania, and their findings suggest no evidence of reduced employment due to a rise in minimum wages; instead, it led to a rise in employment contrary to the conventional belief. Subsequently, Neumark and Wascher (2000) used payroll data, as opposed to telephone survey data used by Card and Krueger (1994), to re-investigate the impact of minimum wage on employment and found contradictory results, pointing to a decline in employment in fast food outlets in New Jersey relative to Pennsylvania. Ropponen (2011) reconciled the results of Card and Krueger with those of Neumark and Wascher and concluded that the differences in results could be explained by differences in sample used (i.e., small restaurants vs large fast-food chains) in these studies. ...
This paper highlights the critical role that demand-shock and policy-shock induced finite changes play for the unconventional employment consequences of such shocks at a general equilibrium of a multi-sector competitive economy. A labour market reform that lowers the institutional costs of hiring workers for the firms in traditional import-competing sectors, and a secular rise in world-demand for non-traditional skill-based exports that raises its world price, are the two specific and pertinent shocks that we consider. We show a small or minor labour market reform can paradoxically result in a larger unemployment of unskilled labour due to one of the import-competing sectors shutting down as it fails to cope up with the import competition. Subsequent reforms however raises aggregate employment. Thus, we may have a J-curve like employment response to gradual and sequential labour market reforms. A big-bang approach to policy reform may work better by avoiding such an initial adverse employment effect. Our findings add to the growing body of literature that challenges conventional wisdom about labour market flexibility having favourable impact on employment. These also emphasize the need for policymakers to carefully consider the broader economic context and potential sectoral shifts when designing labour market reforms. On the other hand, contrary to apprehensions, we show that global-demand-driven hike in the world price of the skill-based export goods may initially raise aggregate employment of unskilled workers due to a similar finite change.
... Sin embargo, esto sugiere que los efectos de los salarios mínimos en las economías europeas no son tan relevantes y también que no hay consenso sobre sus efectos reales. • (Neumark & Wascher, 2000) hacen un ravisión de la investigación realizada por (Card & Krueger, 1994) concluyendo que el uso de datos más concretos modifica cualitativamente los resultados de la investigación. En este caso, se usaron los datos de nómina de los restaurantes en comparación con los usados por Card y Krueger, se encontró que el salario mínimo sí tuvo una afectación negativa en términos del empleo en New Jersy, contrario a lo evidenciado por Card y Krueger en 1994. ...
... La anualidad de las observaciones, aunque representa un excelente resultado en la significancia del modelo, podría variar como lo expresan (Neumark & Wascher, 2000) respecto al uso de datos más concretos, pues podrían modificar cualitativamente los resultados de la investigación. Sin embargo, la disponibilidad o transformación, a datos mensuales, por ejemplo, podría dar luces diferentes. ...
La investigación busca establecer el impacto que el salario mínimo y otros factores económicos tienen sobre el desempleo en Colombia durante el período 1993-2021, a través de la especificación de un modelo econométrico de mínimos cuadrados (MCO). La investigación aporta un modelo econométrico que tienen excelentes resultados en cuanto a la significancia puntual y conjunta de las variables, demostrando que el salario mínimo sí tiene relación con la tasa de desempleo en Colombia durante el período observado, el cual tiene efectos cíclicos en los períodos de 1993-2000, 2001-2015 y 2016-2021, tanto positivos como negativos. Así mismo se descubre la relación lineal entre la formación bruta de capital fijo y la tasa de desempleo, descubriendo que la formación bruta de capital fijo es un factor económico que, si aumenta, puede combatir el desempleo en el país.
... Neumark and Wascher were one of the greatest opponents of Card and Krueger's results and directly challenged their conclusions. Neumark and Wascher [15,16] used the payroll statements of the fast-food chains in the US (instead of data from interviews, as Card and Krueger did), comparing the states of New Jersey and Pennsylvania, and found that an increase in the minimum wage resulted in a decrease in jobs for unskilled workers. ...
... Neumark and Wascher directly challenged Card and Krueger's conclusions with their own empirical study [16] They examined payroll data (instead of data from interviews, as in the case of Card and Krueger) from the fast-food industry in the US, and compared the states of New Jersey and Pennsylvania, as did Card and Krueger. Their findings pointed to a decrease in jobs for unskilled workers from an increase in the minimum wage. ...
Definition
The effect of minimum wages on employment is a mature, continuously researched topic. This study discusses the core theoretical approaches on the relationship between the minimum wage and employment, which is reflected by the empirical results from the international literature. Moreover, it presents the findings of the most recent research and the results of meta-analyses of this issue. While the theoretical approaches and outcomes of empirical studies vary, the meta-analysis demonstrates the lack of a significant correlation between minimum wages and employment. In light of the latest developments and meta-regressions, the literature does not provide a clear and definite sign of the relationship, but the trend seems to be driven towards a negative direction of the impact for the more sensitive groups. Therefore, further light needs to be shed onto this issue.
... For other countries, Campolieti (2020) provided a meta-analysis for Canada, and Dube (2019) summarised the international evidence. Despite many years since the Card and Krueger (1994) findings on the positive relationship between minimum wage and employment and the Neumark and Wascher (2000) counterarguments, neither the direction nor strength of this relationship has been unequivocally determined. The most recent studies indicate a small and negative impact of minimum wage growth on employment, particularly among the young and less educated. ...
Aim: The research aims to compare the effects of a change in the national minimum wage on the wage distribution in the low and high-paid economic sectors. We assess how wages in different economic sectors react to the minimum wage policy established at the national level. Methodology: We use individual wages and employment characteristics data from the Structure of Earnings Survey in Poland. The methodology applied in this study uses reweighting decomposition based on the non-parametric approach of DiNardo et al. (1996). Results: The results showed that minimum wage growth impacts economic sectors differently. In low-wage sections, minimum wage legislation forced wage growth in the left tail of the wage distribution. Up to the third decile, wage growth was equal to minimum wage growth. Moreover, the results indicated the significantly varying lengths of the spill-over effects across the analysed NACE sections. We found strong spill-over effects in low-wage sections on the entire wage distribution. In the high-wage sector, we did not observe the spill-over effects of a minimum wage increase. Implications and recommendations: Our results are important from both the theoretical and practical points of view as they explain why the literature reports conflicting evidence regarding the impact of minimum wage changes on wage distribution and the presence of the spill-over effects. Our results indicate that the most important reason is that national minimum wage increases affect wages in different parts of the economy to different extents, and thus are beneficial for the policymakers. They show that from the point of view of the policy of compressing wage inequalities, the effects of raising the minimum wage turned out to be not so obvious. Originality/value: According to our knowledge, this is the first study on the impact of minimum wage on wage distribution at the NACE economic section level.
... For other countries, Campolieti (2020) provides a meta-analysis for Canada and Dube (2019) summarises the international evidence. Despite many years have passed since the Card and Krueger (1994) findings on positive relationship between minimum wage and employment and the Neumark and Wascher (2000) counterarguments, neither the direction nor strength of this relationship has been unanimously determined. Most recent studies indicate a small and negative impact of minimum wage growth on employment, particularly among the young and less educated. ...
Research background: The number of research regarding employment effects of minimum wages is enormous. Another problem examined by prior studies is the impact of minimum wage increases on the wages. The evidence shows that minimum wage increases compress the wage distribution. The same literature brings conflicting evidence regarding minimum wage spill-over effects. Purpose of the article: The study analyses the effects of a minimum wage increase on the wage distribution of low- and high-wage sectors and possible spill-overs. The analysed period 2014-2018 is characterized by relatively stable economic conditions, while the minimum wage increased by 25%. Methods: We follow case study method and as example Poland, the EU country with high share of minimum wage workers. We use individual data on wages and worker characteristics from the Structure of Earnings Survey in Poland for 2014–2018. We use reweighting and decompose counterfactual wage distribution. Findings & value added: In low-wage sector, a wage increase in the left tail of the distribution is almost entirely due to the increase in the minimum wage level and spill-over effects are present throughout the distribution. In high-wage sector the role of the minimum wage growth is weaker and also the workers’ characteristics have substantial impact on wages; no spill-over effects of a minimum wage increase are observed. We demonstrate that the conflicting evidence on the effects of minimum wage changes on the wage distribution may occur because the effects differ across the low- and high-paid economic sectors. They depend on sector productivity and openness.
... Card and Krueger (1994) survey a number of fast-food chain restaurants in New Jersey and Pennsylvania to collect information on the percentage of part-time and full-time employees each restaurant employed, the number of hours they worked, the prices of meals, and the wages paid before and after the minimum wage law went into effect. In a follow-up paper, Card and Krueger (2000) respond to critiques by Berman (1995) and Neumark and Wascher (2000) by appending their original survey data with the ES-202 program, which is published by the Bureau of Labor Statistics and provides quarterly employment statistics by county and industry. 1 In order to revisit the topic, we empirically analyze the fast-food industry in Maryland and Pennsylvania before and after the minimum wage increase in Maryland on January 1, 2022, thirty years after the New Jersey law in Card & Krueger (1994). ...
Economic theory suggests that increasing minimum wage could lead to a decrease in employ- ment, especially for industries most sensitive to minimum wage laws. Using Pennsylvania as a control group, we study the labor implications of Maryland’s increase in minimum wage in 2022 using a difference-in-differences approach. Although OLS regressions infer that the minimum wage hike had no effect on employment in the fast-food industry, our more rigorous fixed effects regressions indicate that the minimum wage law had a negative and statistically significant impact on employment, implying that higher minimum wage caused an increase in unemployment among fast-food workers.
JEL classifications: J20, K31
... The most frequently applied quasi-experimental methods include difference in differences (DID), propensity score matching, regression discontinuity design, and the SCM. Neumark and Wascher (2000) use the DID method to examine the effect of increasing hourly wages on the hiring level in New Jersey. In their study, 410 fast food restaurants in eastern Pennsylvania and New Jersey are surveyed. ...
... An excellent illustration of the relevance of estimating distribution functions is Ropponen (2011), which applies the changes-in-changes estimator by Athey & Imbens (2006) to estimate the effect of minimum wage changes on employment levels in order to reconcile the classical conflicting results about the minimum wage debate in Card & Krueger (2000) and Neumark & Wascher (2000). Spiess et al. (2023) investigates high-dimensional linear regression models in SCMs. ...
Synthetic control methods (SCMs) have become a crucial tool for causal inference in comparative case studies. The fundamental idea of SCMs is to estimate counterfactual outcomes for a treated unit by using a weighted sum of observed outcomes from untreated units. The accuracy of the synthetic control (SC) is critical for estimating the causal effect, and hence, the estimation of SC weights has been the focus of much research. In this paper, we first point out that existing SCMs suffer from an implicit endogeneity problem, which is the correlation between the outcomes of untreated units and the error term in the model of a counterfactual outcome. We show that this problem yields a bias in the causal effect estimator. We then propose a novel SCM based on density matching, assuming that the density of outcomes of the treated unit can be approximated by a weighted average of the densities of untreated units (i.e., a mixture model). Based on this assumption, we estimate SC weights by matching moments of treated outcomes and the weighted sum of moments of untreated outcomes. Our proposed method has three advantages over existing methods. First, our estimator is asymptotically unbiased under the assumption of the mixture model. Second, due to the asymptotic unbiasedness, we can reduce the mean squared error for counterfactual prediction. Third, our method generates full densities of the treatment effect, not only expected values, which broadens the applicability of SCMs. We provide experimental results to demonstrate the effectiveness of our proposed method.
... In particular, there is no consensus regarding its effects on variables such as employment and income inequality. For example, the discussions between Brown et al. (1982) and Wellington (1991) or Card and Krueger (1994) and Neumark and Wascher (2000); show the difficulty of convincingly identifying the effects of increases in the minimum wage on employment levels. In a more recent example, Derenoncourt et al. (2021) and Parente (2022) study the effects of a series of persistent and large increases in the real minimum wage in Brazil and reach seemingly contradicting results in terms of their distributive effect. ...
I evaluate the effects of the 2016 minimum wage hike in Peru on the approval of government performance. My identification strategy exploits the regional heterogeneity in the share of workers directly affected by the increase to implement a series of difference-indifferences specifications. For every percentage point increase in the share of treated workers, the approval of the central government (i.e., the president) also increases by a percentage point. I find a partial spillover effect to other levels of government. These results are robust to a number of alternative specifications and falsification tests, and cannot be explained by the results of the 2016 presidential elections. My findings suggest that the main mechanisms behind these causal effects are improvements in subjective living conditions and observed labor market performance.
... The wage floor of e8.50 places Germany in the middle of the international minimum wage ranking (OECD, 2015, p. 37). Expectations on its effects on employment were predominantly negative, even though both theory and empirics are not conclusive on this topic (see Neumark andWascher, 2007, 2008). For the long run, ex-ante simulations predicted a reduction of 500,000 to 900,000 jobs, while positive effects on poverty prevention are small due to the German in-work benefits regulations and withdrawal rates from 80 to 100 percent for households with low income (Müller and Steiner, 2013;Knabe et al., 2014). ...
Am 1. Januar 2015 wurde in Deutschland ein allgemeiner gesetzlicher Mindestlohn in Höhe von 8,50 € brutto pro Stunde eingeführt. Diese Dissertation widmet sich den Auswirkungen der Mindestlohneinführung in Deutschland sowie Lohnuntergrenzen im Europäischen Kontext und trägt damit zur nationalen und internationalen Forschung bei. Das zweite Kapitel dieser Arbeit fasst die in bisherigen Studien herausgearbeiteten kurzfristigen Effekte der Mindestlohnreform in einem Überblick zusammen. Es zeigt sich, dass die Mindestlohneinführung einen deutlich positiven Effekt auf die Löhne am unteren Ende der Verteilung hatte. Allerdings wies kurz nach der Reform noch ein nicht unerheblicher Anteil der Beschäftigungsverhältnisse Löhne unter 8,50 € auf. Weiterhin deutet die Evidenz auf geringe negative Beschäftigungseffekte hin, welche durch eine Reduktion von Minijobs getrieben ist. Entgegen der Erwartungen konnten jedoch in der kurzen Frist keine Effekte auf Armut und allgemeine Ungleichheit gefunden werden. Dies hängt insbesondere mit der Tatsache zusammen, dass Arbeitsstunden reduziert wurden und sich die Stundenlohnerhöhung daher nicht auf die Monatslöhne niederschlug. Das dritte Kapitel geht der Frage nach, ob die im Vorfeld prognostizierten Arbeitsplatzverluste im Zuge der Reform kurzfristig eingetreten sind und welche Art der Beschäftigung davon gegebenenfalls stärker betroffen war. Zur empirischen Identifikation der Effekte wird in diesem (sowie im vierten Kapitel) ein regionaler Differenzen-von-Differenzen-Ansatz verwendet, mit dem die Auswirkungen auf reguläre Beschäftigung (Teil- und Vollzeit) sowie Minijobs geschätzt werden. Unsere Ergebnisse deuten darauf hin, dass der Mindestlohn die Gesamtbeschäftigung leicht reduziert hat, was im Wesentlichen auf einen Rückgang von Minijobs zurückzuführen ist. Das vierte Kapitel schließt methodisch an das vorige an. Seine Motivation ergibt sich aus der Beobachtung, dass Frauen unter den Niedriglohnempfänger:innen häufig überrepräsentiert sind. Die primäre Forschungsfrage in diesem Kapitel ist daher, ob der Mindestlohn zu einer Verringerung der geschlechterspezifischen Lohnlücke geführt hat. Dazu identifizieren wir die Effekte auf die Lohnlücke am 10. und 25. Perzentil sowie beim Mittelwert der zugrundeliegenden geschlechtsspezifischen Lohnverteilungen. Unsere Ergebnisse zeigen, dass – verglichen mit Regionen mit niedriger Eingriffstiefe – die geschlechtsspezifische Lohnlücke am 10. Perzentil für mindestlohnberechtigte Beschäftigte in Regionen mit hoher Eingriffstiefe um 4,6 Prozentpunkte gesunken ist. Wir schätzen, dass dies eine Reduktion um 32\% im Vergleich zu 2014 bedeutet. Am 25. Perzentil und am Mittelwert sind die Auswirkungen geringer und nicht gleichermaßen robust. Das fünfte Kapitel behält den geschlechterspezifischen Fokus auf die Mindestlohneffekte bei. Im Vergleich zum Rest der Dissertation weitet es jedoch den Blick auf andere Länder der Europäischen Union. Gemäß der für das vorangegangene Kapitel dargelegten Überlegungen, könnten Frauen potenziell besonders von einem Mindestlohn profitieren. Dies könnte jedoch auch bedeuten, dass sie dadurch auch öfter von Arbeitsplatzverlusten oder Arbeitszeitverkürzungen betroffen sind. Dieses Kapitel resümiert daher einerseits vorhandene Evidenz aus EU-Staaten, die sich auf den Zusammenhang zwischen Lohnuntergrenzen und der geschlechtsspezifischen Lohnlücke bezieht. Darüber hinaus enthält es eine systematische Zusammenfassung von Studien, die den Einfluss von Mindestlöhnen auf Beschäftigungsverluste oder Arbeitszeitveränderungen untersuchen, von denen insbesondere Frauen betroffen sind. Es zeigen sich Hinweise, dass höhere Lohnuntergrenzen mit einer geringeren geschlechtsspezifischen Lohnlücke verbunden sind. Hinsichtlich der Beschäftigung scheinen Frauen nicht per se größere Beschäftigungsverluste zu erleiden als Männer. Allerdings zeigen Studien, dass sich der Mindestlohn hier besonders auf Teilzeitbeschäftigte auswirkt. Es ist daher nicht auszuschließen, dass der negative Zusammenhang zwischen dem Mindestlohn und dem geschlechtsspezifischen Lohngefälle mit den Arbeitsplatzverlusten dieser schlechter bezahlten, oft weiblichen Teilzeitbeschäftigten zusammenhängt. Diese spezifische Form der Arbeit sollte daher im Zusammenhang mit dem Mindestlohn besondere Beachtung finden.
... The issue of the relationship between the minimum wage and employment is also addressed in a case study of a pair of authors (Neumark & Wascher, 2000). Locally, the authors focus on the New Jersey and Pennsylvania circuit with relevant comments. ...
Though 18 states will index their minimum wage to the Consumer Price Index by 2025, few studies have examined indexing's differential employment effects. Leveraging a period of stability in minimum wages (2000–2007) and two distinct national geocoded databases of establishments, we explore how indexing affected employment in Oregon restaurants, one of the earliest indexing states (2003). Nearest‐neighbor matching is used as a preprocessing step before regression, pairing individual restaurants in Oregon to restaurants with similar characteristics in states where the minimum wage was unchanged. We find evidence that establishment employment falls 3.6% after indexing, implying an employment elasticity of −0.18.
Minimum wage laws are touted as an instrument to improve compensation for labor, particularly for the unskilled. However, by increasing wages above market levels, they reduce the demand for labor and dampen the prospects of job seekers. Such laws create a disincentive for corporations to employ low-skilled workers, thereby limiting opportunities for human capital acquisition. Therefore, the minimum wage has the reverse effect of harming rather than uplifting workers. Because this law does not achieve its stated objective, it should be abolished to allow the market to allocate labor and resources efficiently. We do not merely oppose an increase in the minimum wage level proscribed by law, nor do we favor the status quo in this regard. Nor do we call for a decrease in the legally mandated wage. Instead, we make the case that this pernicious legislation should be eliminated root and branch.
Is the charitable sector an aspect of the public or private sectors? Or is it sui generis, and deserving of its own category? If the former is the case, to which sector does philanthropy more closely resemble? These inquiries are of paramount importance, as both proponents of the public and private sectors assert that charity constitutes an integral component of their respective domains. These are the issues to be addressed in the present paper. Charity can be defined as organizations primarily focused on providing social, educational, religious, or other charitable services to the community. These entities primarily aim to address social issues and enhance the well-being of individuals and communities through non-profit means. Consequently, the initial inquiry pertains to the category in which this type of activity most closely resembles. This paper will examine the question of whether the charitable sector should be considered a part of the public or private sector, or whether it stands as a distinct "third sector." While there are some similarities between charities and the public sector, such as the delivery of services to public needs, this analysis ultimately positions charity more closely within the private sector due to its reliance on voluntary contributions and private property rights. In contrast to public institutions funded through compulsory taxation, charities rely on donations, aligning them with private enterprises in terms of autonomy and the voluntary nature of their support. The paper also considers, and refutes, the argument that charity exists in a unique category by highlighting significant overlaps in purpose and function with the private sector. This perspective underscores the notion that, while charity contributes to the public good, it does so without the coercive mechanism characteristic of the state, thereby affirming its compatibility with the values of a free-market economy. In conclusion, the categorization of charity within the private sector underscores its role as a voluntary, civic-minded entity, offering value through its independence from state control and fostering a bridge between individual liberty and collective welfare.
In this article, we consider identification, estimation, and inference procedures for treatment effect parameters using Difference-in-Differences (DiD) with (i) multiple time periods, (ii) variation in treatment timing, and (iii) when the "parallel trends assumption" holds potentially only after conditioning on observed covariates. We show that a family of causal effect parameters are identified in staggered DiD setups, even if differences in observed characteristics create non-parallel outcome dynamics between groups. Our identification results allow one to use outcome regression, inverse probability weighting, or doubly-robust estimands. We also propose different aggregation schemes that can be used to highlight treatment effect heterogeneity across different dimensions as well as to summarize the overall effect of participating in the treatment. We establish the asymptotic properties of the proposed estimators and prove the validity of a computationally convenient bootstrap procedure to conduct asymptotically valid simultaneous (instead of pointwise) inference. Finally, we illustrate the relevance of our proposed tools by analyzing the effect of the minimum wage on teen employment from 2001--2007. Open-source software is available for implementing the proposed methods.
The minimum wage policy is an important labor policy that has been implemented in many countries worldwide to ensure the survival of workers. The Chinese minimum wage policy was first promulgated in 1993. Using national longitudinal survey data from the China Family Panel Studies from 2010 to 2020 and employing the Neumark model, this study examines the impact of minimum wage on wage distribution in China. Three key conclusions emerge. First, the minimum wage significantly increases the wage levels of the low-wage group that earns less than the minimum wage. This suggests the persistence of the minimum wage spike effect in China. Second, the minimum wage increases the wages of individuals earning two to three times the minimum wage, indicating a spillover effect. Third, the effects of minimum wage on wage distributions vary among heterogeneous groups. For instance, the minimum wage spike effect among women, urban hukou workers, public sector workers, and those in the service or retail sectors is more pronounced than that among their counterparts (men, rural migrants, private sector workers, and those in the manufacturing sector). Conversely, the spillover effect is notably more significant among men, rural migrants, private-sector workers, and those in the service or retail sectors than their counterparts.
This paper critically examines the claim that Utah is “the most sexist state” in the United States, as suggested by a WalletHub report ranking it lowest in “Women’s Equality.” Utilizing an economic analysis from the Austrian School perspective, this study scrutinizes the data, metrics, and conclusions of reports by the Utah Women & Leadership Project (UWLP). The analysis focuses on distinguishing statistical disparities from sexism, proposing that observed gender inequalities in Utah are largely influenced by cultural and economic factors, particularly the state’s high marriage rate and traditional gender roles. Contrary to the notion that sexism predominantly drives gender disparities, the paper argues that personal choices and subjective value theory play significant roles in shaping these outcomes. The study highlights the importance of considering cultural context, individual preferences, and the marital asymmetry hypothesis when interpreting gender-related data, challenging the assertion that Utah’s gender disparities are primarily due to sexist attitudes. The findings suggest that Utah’s gender gaps in areas such as income and workforce participation are more accurately attributed to the state’s unique cultural and economic landscape rather than pervasive sexism.
Economic freedom, a measure of the degree of freedom from government intervention in the economy, has been found to be associated with many positive economic outcomes, such as lower unemployment rates, and higher growth of income, employment, and population. One area that remains unexplored is the relationship with food insecurity. Areas with more government intervention may be expected to have higher food insecurity because those interventions can create greater impediments to people's ability to prosper economically. One specific example of that is the minimum wage, which may make it harder for inexperienced low‐skilled workers to obtain employment. We provide the first state‐level examination of the relationship between food insecurity and economic freedom and find higher values of economic freedom (lower levels of intervention) are associated with lower food insecurity. We also examine one specific component of that economic freedom measure, the minimum wage, and find some limited evidence that higher minimum wages are associated with higher food insecurity.
During her nomination hearing, Janet Yellen defended the benefits of a higher minimum wage (Question 66 and follow-up). This study analyzes the impact of minimum wage policies on the profitability of sole proprietors by using a dataset of 430 million reported net incomes with the IRS from 2004 to 2018. Three methods are used to examine the relationship between minimum wage increases and net income for sole proprietors: A panel regression framework that includes all counties, comparing contiguous border county-pairs, and a difference-in-differences approach. We find that minimum wage hikes are associated with a higher net income for sole proprietors, with estimated elasticity between 0.15 and 0.2.
The Directive on Adequate Minimum Wages in the European Union, adopted by the European Parliament and the Council in October 2022 and to be transposed in national law by November 2024, is an important EU instrument aimed at revitalising Europe’s social dimension. With its dual and interlinked objectives of ensuring adequate minimum wage levels and strengthening collective bargaining, the Directive acknowledges the positive role that social dialogue, collective bargaining, and minimum wage regulation play in promoting inclusive economic growth and social cohesion by limiting social exclusion and earnings inequalities.
It should be emphasised that the Directive does not impose obligations on Member States to introduce a statutory minimum wage or to declare collective agreements universally applicable when wage formation is carried out exclusively via collective agreements, as is the case in the Nordic countries, Austria, and Italy. Nor does the Directive aim to set a uniform minimum wage level across Europe, rather it specifies certain criteria, such as a statutory minimum wage corresponding to 60% of the median wage, to ensure that adequate minimum wages are set at national level.
For the 22 EU Member States which have statutory minimum wages, the explicit aims of the Directive regarding the setting of adequate statutory minimum wages are as follows: to achieve a decent standard of living; to reduce wage inequality; to help to close the gender wage gap; to reduce income disparities by lowering levels of in-work poverty, and to contribute to the promotion of social cohesion and upward social convergence within the EU. Another part of the directive deals with the issue of coverage and affects every Member State: the aim is to have 80% of workers covered by collective agreements.
Drawing on a review of the theoretical and empirical literature on minimum wages, the aim of this report is to analyse the potential socio-economic consequences of the Directive on Adequate Minimum Wages in the European Union. Taking an institutional and gender perspective, it assesses the extent to which the Directive may constitute an effective instrument to improve the pay and working conditions of men and women in Europe, reverse the trend in increasing inequalities, help close the gender wage-gap, and reduce gender income disparities by reducing in-work poverty.
The most recent comprehensive review on the employment impact of a moderate increase of statutory minimum wages found no significant employment effects, either for men or for women. Overall, empirical studies on the impact of minimum wages on wage distribution suggest that an increase in minimum wages significantly increases the wages of low-paid workers. This provides strong evidence that minimum wages, by compressing the wage structure at the bottom end of the wage distribution, reduce wage inequality, particularly for women, who are overrepresented among low-paid workers. Furthermore, a moderate increase in minimum wages not only appears to have an equalising effect on wages but also on the earnings distribution at the lower end of the wage distribution. The distributional impact of an increase in minimum wages on household income distribution is the subject of greater controversy. Nevertheless, recent evidence from the United States reveals positive distributional effects of a rise in minimum wages and a reduction of working poor households.
When it comes to the impact of minimum wages on the gender wage gap, a review of available empirical literature shows that increasing minimum wages does contribute to reducing pay disparities between men and women. This finding supports the objectives of the Directive and consistent with the European Commission’s pre-assessment, which found that an uprating of minimum wages in the EU would decrease the gender wage gap on average by around 5%.
In order to assess the impact of the Directive’s aim of increasing levels of collective bargaining, the report analyses the pattern of industrial relations systems across the EU. This analysis shows that systems with certain characteristics – high union density and collective bargaining coverage rates, balanced bargaining power between the two sides of industry, and centralised, coordinated, multi-employer collective bargaining systems – appear not only to favour better working conditions, greater wage and gender equality, but also to deliver better labour market outcomes, economic growth and social cohesion. Labour market governance by the social partners and a developed (tripartite and/or bipartite) social dialogue process, as in the Nordic countries or in Belgium not only seems to better reconcile economic efficiency and social justice, but it also appears better adapted to provide an effective and fair response to the challenges linked to globalisation, demographic, technological change and the green transition. The report also shows that minimum wages tend to have stronger wage equality effects when combined with strong union and high collective bargaining coverage.
As far as gender equality and industrial relations systems are concerned, a review of available evidence shows that the higher wage floors found in countries with high union density, high coverage rate of collective bargaining and highly centralised wage setting raise women’s relative pay and reduce the gender wage gap, since women are to a larger extent located at the bottom end of the wage distribution. Consistent with this evidence, the aim of the Directive (i.e. to increase the collective bargaining rate in all Member States to 80% and, for Member States with minimum wages, to actively involve the social partners in the setting of minimum levels) should lead to a reduction in the gender wage gap.
Furthermore, the analysis shows that the Nordic countries and Belgium, characterised by strong and independent social partners playing a crucial role in the production of labour market norms, wage formation, social protection and welfare state arrangements, score highest among EU countries on the Gender Equality Index. Not only is women’s representation in national parliaments and political bodies among the highest in the world, their high level of trade union membership and involvement in collective bargaining/social dialogue helps put gender equality issues at the top of the political agenda. The strong feminisation of the labour force coupled with the significant modifications in the employment structure, from manufacturing to the services sector, means that, today, union density in the Nordic countries is significantly higher for women than for men. On the other hand, countries with fragmented systems, low union density, low coverage rates of collective bargaining, and less involvement of social partners in the production of labour market and social norms, score lowest on the Gender Equality Index among EU Member States.
In light of these findings, a priority should indeed be to strengthen the representativeness and autonomy of social partners and their institutional capacity to shape labour market and social norms. Such a policy strategy is in line with the aim of the Directive to promote social dialogue and collective bargaining at national level in order to ensure the setting of adequate minimum wage levels that enable a decent standard of living, reduce wage inequality, help close the gender wage gap, reduce the incidence of low-paid workers, and contribute to upward social convergence within the European Union.
If the policy objective of the EU, as illustrated by the adoption of the Directive, is to change direction and to move towards industrial relations systems characterised by high collective bargaining coverage rates and powerful and autonomous social partners playing a crucial role in the production of fair labour market norms, there is, however, a long way to go. This is especially true in Member States that have highly decentralised and non-coordinated, fragmented bargaining systems, such as the single-employer bargaining regimes prevalent in the majority of Central and Eastern European countries. These countries are characterised by both low union density and low coverage rates of collective bargaining, and they are currently far from achieving the target for collective bargaining coverage of 80%. Political and institutional support for upwards convergence in the EU towards a regime of industrial relations favouring a system of labour market governance based on autonomous and strong social partners and constructive social dialogue will be important. This will require effective monitoring, implementation, and financial and political support at both national and EU level.
The Directive on Adequate Minimum Wages in the European Union, in particular the uprating of statutory minimum wages, can thus contribute to improved pay and working conditions of men and women in the labour market and reduce gender wage and earnings inequalities at the lower end of the wage distribution. It must, however, be stressed that gender differences in, for example, labour supply, should continue to be addressed with other policy instruments. Such instruments include the safeguarding and development of public services, the development of public childcare and elderly care facilities, the development of work-life balance arrangements, such as generous and flexible parental leave systems, the development of life-long learning facilities as well as the development of gender neutral fiscal and social protection systems.
Many commentators attribute the decline of child labor in advanced economies to legislation prohibiting this practice. But another view asserts that the amount of child labor declined because rising affluence curbed the demand for and the supply of child laborers. Growing prosperity and cultural changes made it more convenient to educate children, thereby absolving the need for this practice. Although the decline of child labor is best explained by material prosperity, it will be demonstrated in this paper that not only can abolishing child labor be counterproductive, but in some cases, it is a vital platform for the accumulation of human capital. Did child labor all but end in advanced countries because of legislation prohibiting it? Or was it due to the fact that these economies were so well developed, so wealthy, that they could afford to keep youngsters in school instead? The former view is the most popular, the latter, the most correct, as we show in this paper.
This article analyzes the effect of two labor reforms on youth employment: the single minimum wage zone consolidation and the minimum age to work increased from 14 to 15 years old. Both reforms took place in Mexico in the same year. We examine these changes as a quasi-natural experiment to compare cities that change their minimum wage zone with those that do not. We segregate workers by age into two adolescent groups, the underaged and the legal age to work. The differences-in-differences analysis showed that a higher minimum wage increased employment only for adolescents of legal age to work, while the effect on adolescents underaged was null. The results were not robust when we accounted for a more extended period in a panel data analysis, as there were no effects on employment in any group.
In the view of many people, understandably, and all too many economists, disgracefully, the minimum wage law actually boosts compensation for people who would otherwise earn less than the amount established by this legislation. This is a snare and a delusion. In actual point of fact, this law increases the wages of no one at all, at least not in equilibrium; rather it leads to unemployment for those workers unfortunate to have a marginal revenue product below the level mandated by this enactment. It is the burden of the present paper to make good on this claim.
Participants at the 1963 civil rights march on Washington supported minimum wage laws using arguments of economic justice. Many economists at the time argued against the minimum wage based on efficiency concerns rooted in neoclassical theory. After decades of debate, where does the economics profession stand on the justice and efficiency claims of the minimum wage? We discuss the evolution of the minimum wage literature in economics, focusing on racial justice. We highlight recent empirical papers that overwhelmingly support the position of the marchers on Washington while at the same time showing little to no loss of economic efficiency. (JEL D63, J15, J22, J31, J38, K31)
The consumption of tobacco is harmful to health and has huge social costs. "Tax to control tobacco" is a widely implemented tobacco control measure all over the world. In order to examine the achievements of two tobacco excise tax reforms in China in 2009 and 2015 on controlling tobacco consumption, we first establish an intertemporal consumption model for addictive goods, and then validate the effectiveness of the two tobacco excise tax reforms using a Continuous Difference‐in‐Differences Model based on the panel data from 294 cities in China from 2007 to 2018. The results show that the tobacco excise tax reform in 2015 considerably reduced tobacco consumption, while the reform in 2009 did not, providing empirical evidence on the importance of "price links to tax" for tobacco control. Additionally, the study discovers that the tax reform has a heterogeneous effect on the age of smokers, the price of cigarettes, and city size.
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 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 .
The method of synthetic controls is a fundamental tool for evaluating causal effects of policy changes in settings with observational data. In many settings where it is applicable, researchers want to identify causal effects of policy changes on a treated unit at an aggregate level while having access to data at a finer granularity. This article proposes an extension of the synthetic controls estimator that takes advantage of this additional structure and provides nonparametric estimates of the heterogeneity within the aggregate unit. The idea is to replicate the quantile function associated with the treated unit by a weighted average of quantile functions of the control units. This estimator relies on the same mathematical theory as the changes‐in‐changes estimator and can be applied in both repeated cross‐sections and panel data with as little as a single pre‐treatment period. It also provides a unique counterfactual quantile function for any type of distribution.
Despite a large minimum wage literature that analyzes employee outcomes, there is less evidence on firm performance, prices, and quality. Exploiting staggered changes in U.S. minimum wages during 2000–2008 and census data on more than 29,000 hotel properties, we find that doubling the minimum wage as currently debated would reduce average hotel revenues by 6% per year and their occupancy rates by 3.1%. Responses vary by employer quality and organizational form. Although luxury hotels pass through cost increases to their customers with no impact on their revenues, upscale hotels facing more price-sensitive customers reduce prices but still suffer losses in occupancy rates and revenues as they struggle with preserving the expected quality level. They are also most likely to see quality downgrades from their segment. The lower-end hotels also pass through cost increases to their customers but, unlike luxury hotels, face significant declines in occupancy rates and revenues. Overall, the performance effects of minimum wage increases are nonmonotonic across quality. We also find negative impacts on hotel entry rates, although the performance and entry effects appear to be short lived. Furthermore, the negative effects of minimum wages dominate in states without right-to-work regulation, suggesting the need for a more comprehensive approach to labor market regulation.
This paper was accepted by Victoria Ivashina, finance.
Funding: M. Ayyagari received financial support from National Science Foundation Research (U.S) [Grant SES-1660755/1660749].
Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2022.4650 .
Using intertemporal variation in the bounding of a state’s minimum wage by the federal rate and business credit-score data for 15.2 million establishments, we find that the increase in labor costs caused by a higher federal minimum wage leads to lower business credit scores and worsens the financial health of small businesses in the affected states. In particular, small, young, labor-intensive, and minimum-wage-sensitive establishments located in affected states and those located in competitive and low-income areas experience higher financial stress. Increases in the minimum wage are associated with employment reductions and a higher exit rate for small businesses. Our results document some potential costs of a one-size-fits-all nationwide minimum wage for some small businesses.
This paper was accepted by Gustavo Manso, finance.
Funding: This work was supported by the Ewing Marion Kauffman Foundation Junior Faculty Fellowship.
Supplemental Material: The data and internet appendix are available at https://doi.org/10.1287/mnsc.2022.4620 .
Textbook analysis tells us that in a competitive labor market, the introduction of a minimum wage above the competitive equilibrium wage will cause unemployment. This chapter makes three contributions to the basic theory of the minimum wage. First, we analyze the effects of a higher minimum wage in terms of poverty rather than in terms of unemployment. Second, we extend the standard textbook model to allow for income-sharing between employed and unemployed persons in society. Third, we extend the basic model to deal with income-sharing within families. We find that there are situations in which a higher minimum wage raises poverty, others where it reduces poverty, and yet others in which poverty is unchanged. We characterize precisely how the poverty effect depends on four parameters: the degree of poverty aversion, the elasticity of labor demand, the ratio of the minimum wage to the poverty line, and the extent of income-sharing. Thus, shifting the perspective from unemployment to poverty leads to a considerable enrichment of the theory of the minimum wage.
Η μεταστροφή της διεθνούς νεοφιλελεύθερης ρητορείας προς μία περισσότερο δεκτική στάση στη θεσμοθέτηση ενός πλαισίου τακτικών αναπροσαρμογών του κατώτατου μισθού, προέκυψε στον απόηχο της ανεπαρκούς εμπειρικής τεκμηρίωσης των συμπερασμάτων της κυρίαρχης οικονομικής θεωρίας. Επί δεκαετίες, η επικρατούσα οικονομική πολιτική υπογράμμιζε τον κίνδυνο μειωμένης απασχόλησης ως συνέπεια των μισθολογικών αυξήσεων, η οποία μεσοπρόθεσμα, θα οδηγούσε στην όξυνση της ανισότητας και φτώχειας. Το παρόν άρθρο υποστηρίζει ότι η συγκεκριμένη μεταβολή δεν συνιστά απόκλιση από την προηγούμενη ιδεολογική στάση, επισημαίνοντας ότι η συζήτηση για τον κατώτατο μισθό στην Ελλάδα παραμένει εξαιρετικά αναχρονιστική και δύσκαμπτη. Παράλληλα, το άρθρο εξετάζει την επίδραση της αύξησης του κατώτατου μισθού, το 2019, στην ανισότητα των μισθωτών, υπογραμμίζοντας τη σημασία του στην προαγωγή κοινωνικής ευημερίας. Στη συνέχεια επικεντρώνεται στην εμπειρική εξέταση της μακροχρόνιας σχέσης των δύο μεγεθών στην Ελλάδα, με περίοδο αναφοράς τα έτη 1995 έως 2019. Συμπερασματικά, η επιμονή στη μείωση του κατώτατου μισθού με πρόσχημα την διατήρηση του επιπέδου συνολικής απασχόλησης, η οποία εντάθηκε με την εφαρμογή των Προγραμμάτων Οικονομικής Προσαρμογής από το 2012 και ύστερα, δεν επιβεβαιώνεται ούτε βιβλιογραφικά, αλλά ούτε και από τα εμπειρικά δεδομένα.
The purpose of this study is to examine the effects of the 2013 minimum wage reform in Thailand. The study employs a difference‐in‐difference (DID) estimation and utilises data drawn from comprehensive socioeconomic household surveys from 2009 to 2019. The findings suggest that the minimum wage reform significantly increased the average daily earnings, the number of paid days of employment, consumption expenditure per capita, and income per capita. However, the minimum wage reform had little impact on poor households. The results withstand different estimation techniques and a set of additional controls.
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