Employment Effects of Minimum Wages: Evidence from a Quasi-Experiment

Abstract

To estimate the impact of raising the minimum wage on employment, this article uses a natural experiment, arising from six increases in the Western Australian statutory minimum wage during the period 1994-2001. Relative to the rest of Australia, the employment to population ratio in Western Australia fell following each of the six rises, twice by a statistically significant margin. Aggregating the increases, the elasticity of labour demand with respect to the Western Australian statutory minimum wage is found to be 0.13.