Taxation Without Representation? The Political Economy of State Minimum Wage Levels

16 Pages Posted: 2 Jul 2014

See all articles by Kawika Pierson

Kawika Pierson

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Fred Thompson

Willamette University - Atkinson Graduate School of Management

Date Written: June 30, 2014

Abstract

Minimum wage hikes express our sympathy for the working poor and our solidarity with them. But their importance is largely symbolic. The net effects of moderate increases in wage floors are vanishingly small. Statutory wage minimums work like taxes on labor, with their proceeds paid directly to low-wage workers and their costs shifted forward to consumers. Consequently, their distributional effects on the burden side are like those of sales taxes. Variations in state minimums appear to be driven in good measure by a combination of partisan political control and opportunities for burden shifting to nonresidents.

Keywords: Minimum wage, Tax shifting, Incidence, CBO, Partisan Control, Ideology

JEL Classification: D78, H22, H70, J38, J88, L38

Suggested Citation

Pierson, Kawika and Thompson, Fred, Taxation Without Representation? The Political Economy of State Minimum Wage Levels (June 30, 2014). Available at SSRN: https://ssrn.com/abstract=2461018 or http://dx.doi.org/10.2139/ssrn.2461018

Kawika Pierson

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Fred Thompson (Contact Author)

Willamette University - Atkinson Graduate School of Management ( email )

900 State Street
Salem, OR 97301
United States
503-370-6228 (Phone)
503-370-3011 (Fax)

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