State Minimum Wage Changes and Employment: Evidence from One Million Hourly Wage Workers
96 Pages Posted: 5 May 2017 Last revised: 1 Aug 2018
Date Written: July 2018
We use detailed wage data on one million hourly wage employees from over 300 firms spread across 23 two-digit NAICS industries to estimate the effect of six state minimum wage changes on employment. We find that the effect of the minimum wage on employment is nuanced. While the overall amount of low wage employees within firms in states that increase the minimum wage declines, existing minimum wage employees are no less likely to remain employed. We find that firms are more likely to reduce hiring rather than increase turnover, reduce hours, or close locations in order to rebalance their workforce. We also document significant heterogeneity in the employment effect across industries. While firms in the non-tradable goods industries do not reduce employment or hours, firms in the tradable and other goods industries reduce employment and partially substitute lower wage employees with higher skilled labor.
Keywords: Minimum Wage, Labor Economics, Employment, Income
JEL Classification: J01, J23, J38, H11
Suggested Citation: Suggested Citation