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

96 Pages Posted: 5 May 2017 Last revised: 1 Aug 2018

See all articles by Radhakrishnan Gopalan

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

Indiana University - Kelley School of Business - Department of Finance

David Sovich

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

Date Written: July 2018

Abstract

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

Gopalan, Radhakrishnan and Hamilton, Barton H. and Kalda, Ankit and Sovich, David, State Minimum Wage Changes and Employment: Evidence from One Million Hourly Wage Workers (July 2018). Available at SSRN: https://ssrn.com/abstract=2963083 or http://dx.doi.org/10.2139/ssrn.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

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
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

Register to save articles to
your library

Register

Paper statistics

Downloads
407
rank
68,052
Abstract Views
1,689
PlumX Metrics