State Minimum Wage Changes and Employment: Evidence from 2 Million Hourly Wage Workers

76 Pages Posted: 5 May 2017  

Radhakrishnan Gopalan

Washington University in St. Louis - John M. Olin Business School

Barton H. Hamilton

Washington University, Saint Louis - John M. Olin School of Business

Ankit Kalda

Washington University in Saint Louis, John M. Olin Business School

David Sovich

Washington University in St. Louis - John M. Olin Business School

Date Written: May 4, 2017

Abstract

We use detailed wage data on 2 million hourly wage employees from over 300 firms spread across twelve 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 proportion of low-wage employees within firms in states that increase the minimum wage declines, the overall level of employment in these establishments is unaffected - i.e. firms substitute low-wage employees with marginally higher skilled labor. Firms are more likely to reduce hiring rather than increase turnover to rebalance their work force. Employees directly affected by the increase to the minimum wage are no less likely to remain employed than their otherwise identical counterparts in states that do not change their minimum wage. Finally, we document significant heterogeneity in the effect of the minimum wage across industries, but not across states. This cautions against drawing broad conclusions from single industry studies.

Keywords: Minimum Wage, Labor Economics, Employment, Income

JEL Classification: J01, J23, J38, H11

Suggested Citation

Gopalan, Radhakrishnan and Hamilton, Barton H. and Kalda, Ankit and Sovich, David, State Minimum Wage Changes and Employment: Evidence from 2 Million Hourly Wage Workers (May 4, 2017). Available at SSRN: https://ssrn.com/abstract=2963083

Radhakrishnan Gopalan

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Barton H. Hamilton

Washington University, Saint Louis - John M. Olin School of Business ( email )

One Brookings Drive, Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-8057 (Phone)
314-935-6359 (Fax)

HOME PAGE: http://www.olin.wustl.edu/faculty/hamiltonb/

Ankit Kalda

Washington University in Saint Louis, John M. Olin Business School ( email )

St. Louis, MO
United States

David Sovich (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

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