Minimum Wage Effects in the Longer Run

We re-examine recent cross-state evidence on the employment effect of the minimum wage. A re-evaluation of the data used in Neumark and Wascher's (1992) study of the minimum wage provides no support for their conclusion that the minimum wage has an adverse effect on teenage employment. Neumark and Wascher's findings are shown to be due to an inadvertent mistake in the definition of their school enrollment variable. In addition, Neumark and Wascher's coverage-weighted relative minimum wage index is shown to be negatively correlated with average teenage wages. We also re-analyze the experiences of individual states following the April 1990 increase in the Federal minimum wage, allowing for a full year lag in the effect of the law and controlling for changes in (properly measured) enrollment rates. These changes actually strengthen Card's (1992a) conclusion that the 1990 increase in the Federal minimum had no adverse employment effect. Lastly, we find that subminimum wages are rarely used, casting doubt on the claim that subminimum wage provisions temper any employment losses attributable to the minimum wage.

We estimate the longer-run effects of minimum wages, the Earned Income Tax Credit, and welfare on key economic indicators of economic self-sufficiency in disadvantaged neighborhoods. Our strongest findings are twofold. First, the longer-run effects of the EITC are to increase employment and to reduce poverty and public assistance, as long as we rely on national as well as state variation in EITC policy. Second, tighter welfare time limits also reduce poverty and public assistance in the longer run; while the effect on public assistance result may be mechanically related to loss of benefits, the effect on poverty is more likely behavioral. It is harder to draw firm conclusions about minimum wages and welfare benefits. With some specifications and samples, the evidence suggests that higher minimum wages lead to longer-run declines in poverty and the share of families on public assistance, whereas higher welfare benefits have adverse longer-run effects. However, the evidence on minimum wages and welfare benefits is not robust -and the estimated effects of minimum wages are sometimes in the opposite direction, including when we restrict the analysis to more recent data that is likely of more interest to policymakers.

Exposure to minimum wages at young ages may lead to longer-run effects. Among the possible adverse longer-run effects are decreased labor market experience and accumulation of tenure, lower current labor supply because of lower wages, and diminished training and skill acquisition.

We use Canadian data over the period of 1991Q1 to 2019Q2 to examine the effect of higher minimum wages on consumption, measured as the real retail trade sales per adult population. Such an examination is rare in the extant literature and it is timely given the increasing debate concerning the stimulus versus inflationary effects arising from wage polices because of COVID-19 global pandemic. We apply the autoregressive distributed lag model to determine the causal relationship between these variables. We find one long-run cointegrating relationship that runs from the real minimum wage to the real retail trade sales. In addition, we find that a 1% increase in the minimum wage is associated with almost a 0.5% increase in real retail trade sales in the long run. While our findings rest on several statistical assumptions, there is strong evidence in support of the position that minimum wage strengthens aggregate consumer spending, and thereby the standard of living, economic growth and stability. This is a position that differs from the conclusions drawn from mainstream academic and policy debates on the economic usefulness and efficacy of minimum wage increases. JEL Codes: C30, E21, E24

Results suggest that doubling Indonesia's minimum wage led to a 10 percent increase in average wages, a 2 percent decrease in wage employment, and a 5 percent decrease in investment. The disemployment effect appears to be considerable in small firms, but employment may actually increase in large firms. Minimum wages in Indonesia were tripled in nominal terms, and doubled in real terms, in the first half of the 1990s. Rama evaluates the effects of this hike on wage earnings, wage employment, and investment. After describing Indonesia's minimum wage policy and surveying the literature on the effects of minimum wages, Rama applies relatively simple statistical tools to individual and aggregate data. He visually inspects the wage distribution for full-time laborers and employees to assess the extent of compliance with minimum wages. He uses regression analysis involving minimalist specifications and data aggregated by province to estimate the elasticity of wage earnings, wage employment, and investment with respect to the minimum wage. A wide dispersion in the ratio of minimum wages to labor productivity across the 27 Indonesian provinces can be used to identify the effects of the minimum wage. The results suggest that minimum wages have a moderate effect on outcomes in Indonesia's labor market. Taken at face value, these results imply that doubling the minimum wage led to a 10 percent increase in average wages, a 2 percent decrease in wage employment, and a 5 percent decrease in investment. The disemployment effect appears to be considerable in small firms, but employment may actually increase in large firms. This paper - a product of the Poverty and Human Resources Division, Policy Research Department - was written as part of a broader labor study on Indonesia undertaken by East Asia and Pacific, Country Department III. The research was also supported by the Bank`s Research Support Budget under the research project The Impact of Labor Market Policies and Institutions on Economic Performance (RPO 680-96). The results of the research were presented at a joint Ministry of Manpower, Indonesia-World Bank workshop in Jakarta in April 1996. The author may be contacted at mrama@worldbank.org.

We estimate the minimum wage's effects on low-skilled workers' employment and income trajectories. Our approach exploits two dimensions of the data we analyze. First, we compare workers in states that were bound by recent increases in the federal minimum wage to workers in states that were not. Second, we use 12 months of baseline data to divide low-skilled workers into a "target" group, whose baseline wage rates were directly affected, and a "within-state control" group with slightly higher baseline wage rates. Over three subsequent years, we find that binding minimum wage increases had significant, negative effects on the employment and income growth of targeted workers. Lost income reflects contributions from employment declines, increased probabilities of working without pay (i.e., an "internship" effect), and lost wage growth associated with reductions in experience accumulation. Methodologically, we show that our approach identifies targeted workers more precisely than the demographic and industrial proxies used regularly in the literature. Additionally, because we identify targeted workers on a population-wide basis, our approach is relatively well suited for extrapolating to estimates of the minimum wage's effects on aggregate employment. Over the late 2000s, the average effective minimum wage rose by 30 percent across the United States. We estimate that these minimum wage increases reduced the national employment-to-population ratio by 0.7 percentage point.

The Econometrics and Economics of the Employment Effects of Minimum Wages: Getting from Known Unknowns to Known Knowns

PurposeThis study aims to explore the spatial impact of an increase in the minimum wage on the labor productivity of star-rated hotels in China.Design/methodology/approachThe impact is analyzed by using the dynamic spatial Durbin model.FindingsThe authors find a U-shaped link between the increase in minimum wage and labor productivity of star-rated hotels. The long-term impact of a minimum wage increase has a greater influence on labor productivity than its short-term effects. While there is no notable spatial spillover impact observed in the sample of 31 provinces in China, the authors do identify a spatial spillover effect of the minimum wage rises on the labor productivity of star-rated hotels in the central area. Furthermore, they observe heterogeneity across China. The eastern and western regions exhibit a U-shaped relationship, whereas the central region exhibits an inverted U-shaped relationship.Practical implicationsThe findings of this study allow government agencies to get a more comprehensive comprehension of the actual consequences of minimum wage hikes on the tourism and hospitality sector, thereby establishing a solid basis for them to develop appropriate policies. Moreover, it offers a variety of suggestions aimed at enhancing the quality and efficiency of hotel management.Originality/valueResearch on the effects of minimum wage standards is scant in the hospitality industry. Based on human capital investment theory, this study examines the effect of the minimum wage standard hikes on labor productivity of star-rated hotels from the spatial perspective, filling the existing research gap.

The Contribution of the Minimum Wage to U.S. Wage Inequality Over Three Decades: A Reassessment

Minimum wages and school enrollment of teenagers: a look at the 1990’s

I. INTRODUCTION Issues associated with minimum wages are generating heated debate in China. Supporters argue that in the transition to a market economy, minimum wages can serve an important safety-net role by providing a minimum floor on wages, thereby protecting otherwise vulnerable workers from the most egregious aspects of intensively competitive markets (Sun 2006; Zhang 2007; Zhang and Deng 2005). This is especially the case for the large influx of rural migrant workers coming from the countryside to the city, both from within the province and from other provinces. Furthermore, the higher labor cost may foster managerial efficiency and labor productivity and induce employers to move up the value-added chain and invest in productivity improving technology (Cooke 2005). From these lines of argument, Chinese scholars have often argued in favor of the more proactive use of minimum wages, which they often regard as otherwise too low and ineffective (Han and Wei 2005). In contrast, opponents of minimum wage laws argue that they inhibit the transition to a market economy by interfering with China's comparative advantage based on an abundance of low-wage labor. Such regulations raise costs and inhibit the growth in demand for Chinese products and hence in the derived demand for their labor. Such growth would otherwise increase both employment and wages. Opponents reiterate the basic arguments against minimum wage legislation in that it will reduce the employment opportunities of low-wage labor and also lead to offsets in such forms as reductions in other elements of the compensation package (Gong 2009; Chen 2001; Xue 2001; Ye 2005). This argument is part-and-parcel of the broader argument that artificially raising wages can jeopardize the growth process that by itself will foster increases in the demand for labor and hence foster higher wages and improved labor standards in general. (1) China's experience with minimum wages is new, having first introduced them in 1993. As discussed subsequently, however, minimum wages have been altered many times since then such that they can be regarded as a potentially important policy instrument. In spite of this importance, there are very few empirical studies on the effects of minimum wages in China (Luo 2007a, 2007b; Shi 2009) and only one study in English (unpublished) to our knowledge (Ni, Wang, and Yao 2008). This is part of the more general gap of a lack of evidence on labor markets in developing countries (Hamermesh 2002)--evidence that could otherwise facilitate critical evidence-based policy making. This is particularly important in the minimum wage area because minimum wages are obviously subject to policy control and manipulation, and in countries such as China, they are an integral part of the transition to a market economy. The purpose of this article is to begin to fill that gap by providing evidence of the impact of minimum wages in China. We do so using the novel methodology of a prespecified research design (Levine 2001; Neumark 2001) based on data that provide a large number of minimum wage changes from which to identify the effects of minimum wages. The article is structured as follows. Section II discusses the theoretically expected impact of minimum wages and Section III outlines the existing empirical evidence from the literature in both developed and developing countries. Section IV provides details on minimum wage legislation and its implementation in China. Section V outlines the methodology of the prespecified research design and provides the estimating equation, while Section VI outlines the data. The empirical results are presented in Section VII, and Section VIII provides a concluding summary. II. EXPECTED IMPACT (2) Unlike the empirical evidence that is controversial (discussed subsequently), the theoretically expected impact of minimum wage legislation is well established in the literature. …

Federal Minimum Wage Hikes Do Reduce Teenage Employment: The Time Series Effects of Minimum Wages in the US Revisited

Various U.S. states and municipalities raised their mandated minimum wages between 2017 and 2019. In some areas, minimum wages became high enough to bind for more professional workers, such as lower paid staff at nursing facilities. We add to the small prior literature on the effects of minimum wages on nursing facility staffing using novel establishment-level data on daily hours worked; these data allow us to examine changes in staffing hours along margins previously unexplored in the minimum wage literature. We find no evidence that minimum wage increases reduced hours worked among lower-paid nurses in nursing facilities. In contrast, we find that increases in state and local minimum wages increased hours worked per resident day by nursing assistants; increases occurred for the average of all days throughout the month and on weekend days. We also find that a higher minimum wage increased the share of days in the month that facilities meet at least 75% of the minimum recommended levels of staffing for nursing assistants. These results lessen concerns that minimum wage hikes may reduce the quality of resident care at nursing facilities.

Assessing the main and spillover effects of Seattle's minimum wage on establishment decisions

The topic being analyzed in this article is Minimum wages in the Baltic countries. Authors paper analyzes the effect of the rise of the minimum wages within the Baltic States, particularly in Lithuania. Authors utilized SurveyMonkey website to aid in obtaining information about the effect of the minimum wage in Lithuania- particularly to do with price changes, redundancy as well as differences in the effect of minimum wage with respect to differing genders as well as ages and wage bands. Higher minimum wages, despite being controversial, are observed to be beneficial for the economy due to their effects on immigration and the perception of locals on their ability to cope with prices rising as well as their perception on experiencing the benefits of minimum wages increasing. Upon completion of survey, authors used SPSS software to effectively analyze results and determine any correlations.