76 Pages Posted: 5 May 2017
Date Written: May 4, 2017
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: 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