The Effect of Minimum Wages on Low-Wage Jobs

5 Jun, 2019 at 13:59 | Posted in Economics | 2 Comments

minimumThe figure shows the effect of an average minimum wage increase on the wage distribution at each wage level relative to the minimum wage. Minimum wage increases led to a clear reduction in jobs below the new minimum wage, confirming that the minimum wages we study are binding. The reduction in jobs paying below the minimum was balanced by a sharp increase in the number of jobs paying at the new minimum, along with additional increases in jobs paying up to $5 above the new minimum. As the figure also shows, we found virtually no change in employment higher up in the wage distribution even up to the highest wage level. Estimates of the change in jobs five years after a change in the minimum wage, as a share of total employment before the increase. Overall, then, low-wage workers saw a wage gain of 7 percent after a minimum wage increase, but little change in employment.

D. Cengiz, A. Dube, A. Lindner, and B. Zipperer

Lo and behold — doesn’t an increase in the minimum wage reduce employment? That’s what we’ve all read in our textbooks. But the answer is no! Although there are a few studies that come up with another answer, the overwhelming evidence shows​ that the employment effects are at most minimal.

2 Comments

  1. Cherry-picking studies from the U.S… I thought you said we should listen to Andrew Gelman.

  2. Be careful with statistics / econometrics, because with it, you can come to the conclusion you want. There are so many variables that can not be contained in the account and then you can make various adjustments and use different methodologies to make the numbers reflect your opinion. Statisticians themselves are the first to admit it. Just to give you an idea, I am going to share here a series of fairly rigorous empirical / statistical studies that have concluded the opposite of what your study concluded.


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