State Minimum Wage Changes and Employment: Evidence from 2 Million Hourly Wage Workers
77 Pages Posted: 5 May 2017 Last revised: 17 Nov 2017
Date Written: November 16, 2017
We use detailed wage data on 2 million hourly wage employees from over 300 firms spread across 22 two-digit NAICS industries to estimate the effect of six minimum wage changes on employment. The effect of minimum wages 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 or close locations 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 head-counts or hours, firms in the tradable goods industries reduce employment and substitute lower wage employees with marginally higher skilled labor.
Keywords: Minimum Wage, Labor Economics, Employment, Income
JEL Classification: J01, J23, J38, H11
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