Not Available for Download

Are the Effects of Minimum Wage Increases Always Small? New Evidence from a Case Study of New York State

Posted: 12 Jun 2012  

Joseph J. Sabia

San Diego State University - Department of Economics

Richard V. Burkhauser

Cornell University - Department of Policy Analysis & Management (PAM); University of Melbourne, Melbourne Institute

Benjamin Hansen

University of Oregon - Department of Economics; NBER; IZA

Date Written: April 1, 2012

Abstract

The authors estimate the effect of the 2004–6 New York State (NYS) minimum wage increase from $5.15 to $6.75 per hour on the employment rates of 16- to 29-year-olds who do not have a high school diploma. Using data drawn from the 2004 and 2006 Current Population Survey, they employ difference-in-difference estimates to show that the NYS minimum wage increase is associated with a 20.2% to 21.8% reduction in the employment of less-skilled, less-educated workers, with the largest effects on those aged 16 to 24. Their estimates imply a median employment elasticity with respect to the minimum wage of around –0.7, large relative to previous researchers’ estimates. The authors’ findings are robust to their choice of geographically proximate comparison states, the use of a more highly skilled within-state comparison group, and a synthetic control design approach. Moreover, their results provide plausible evidence that state minimum wage increases can have substantial adverse labor demand effects for low-skilled individuals that are outside previous elasticity estimates, ranging from –0.1 to –0.3.

Keywords: minimum wage, employment, difference-in-difference

JEL Classification: J30, J31

Suggested Citation

Sabia, Joseph J. and Burkhauser, Richard V. and Hansen, Benjamin, Are the Effects of Minimum Wage Increases Always Small? New Evidence from a Case Study of New York State (April 1, 2012). Industrial and Labor Relations Review, Vol. 65, No. 2, 2012. Available at SSRN: https://ssrn.com/abstract=2083088

Joseph J. Sabia (Contact Author)

San Diego State University - Department of Economics ( email )

5500 Campanile Drive
San Diego, CA 92182
United States

Richard V. Burkhauser

Cornell University - Department of Policy Analysis & Management (PAM) ( email )

120 Martha Van Rensselaer Hall
Ithaca, NY 14853
United States

University of Melbourne, Melbourne Institute ( email )

Level 5, FBE Building, 111 Barry Street
161 Barry Street
Carlton, VIC 3053
Australia

Benjamin Hansen

University of Oregon - Department of Economics ( email )

1285 University of ORegon
Eugene, OR 97403
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Paper statistics

Abstract Views
1,123