Price Floors and Employer Preferences: Evidence from a Minimum Wage Experiment

71 Pages Posted: 16 Jan 2017

See all articles by John J. Horton

John J. Horton

New York University (NYU) - Department of Information, Operations, and Management Sciences

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Date Written: January 13, 2017

Abstract

Firms posting job openings in an online labor market were randomly assigned minimum hourly wages. When facing a minimum wage, fewer firms made a hire, but those workers they did hire were paid a higher wage. However, the reduction in hiring was not large, even at the highest minimum wage imposed. In contrast, minimum wages substantially reduced hours-worked, across cells. Firms facing a higher minimum wage also hired more productive workers, which can explain, in part, the reduction in hours-worked: with more productive workers, projects were simply completed in less time. This labor-labor substitution margin of adjustment would presumably be less effective in equilibrium, if all firms sought out more productive workers. However, using the platform’s imposition of a market-wide minimum wage after the experiment, I find that many of the experimental results also hold in equilibrium, including the labor-labor substitution towards more productive workers.

Keywords: minimum wages, labor demand, labor supply, experiments

JEL Classification: J00

Suggested Citation

Horton, John J., Price Floors and Employer Preferences: Evidence from a Minimum Wage Experiment (January 13, 2017). Available at SSRN: https://ssrn.com/abstract=2898827 or http://dx.doi.org/10.2139/ssrn.2898827

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