Explaining the Small Employment Effects of the Minimum Wage in the United States

Abstract

This paper reviews the most recent wave of research — roughly since 2000 — on the employment effects of the U.S. minimum wage and concludes that the weight of evidence points to little or no employment response to modest increases. The paper then examines eleven possible adjustments to minimum‐wage increases that may explain why the measured employment effects are consistently small. Given the relatively low cost to employers of modest increases in the minimum wage, these adjustment mechanisms appear to be sufficient to avoid employment losses, even for employers with a large share of low‐wage workers.