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

77 Pages Posted: 5 May 2017 Last revised: 17 Nov 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: November 16, 2017

Abstract

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

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 (November 16, 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 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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