The facts show otherwise
- Average household income of a minimum wage earner: $49,885
- Proportion of minimum wage earners under 25: 53 percent
- Proportion of all adult hourly workers who are single parents working full time: 6.3 percent
- Proportion of adult minimum wage earners who are single parents working full time: 6.1 percent
For more facts on who earns the minimum wage, read:
As Congress and policy makers resume the debate over raising the minimum wage, they should ground their arguments on solid facts and expert analysis. To assist policy makers in assessing the consequences of a higher minimum wage, the Heritage Foundation has compiled a list of economic studies that question the effectiveness of minimum wages increases. Most of these papers can be accessed via JSTOR or other sites with access to academic journals.
Paper Categories
Recent Heritage Work
Low-Income Workers May Be Worse Off if Congress Increases the Minimum Wage by Rea S. Hederman, Jr., and Sam Hyman
August 3, 2006 (WebMemo #1187)
Raising the minimum wage may cause some low-income workers to receive fewer government benefits.
Who Earns the Minimum Wage--Single Parents or Suburban Teenagers? by Rea S. Hederman, Jr., and James Sherk
August 3, 2006 (WebMemo #1186)
Raising the minimum wage will not help low-income workers or single parents.
Minimum Wage Workers’ Incomes Rise When the Minimum Wage Does Not by James Sherk
July 28, 2006 (WebMemo #1181)
Hard work, education, and growing skills lead to higher wages. Government intervention does not.
Raising the Minimum Wage Hurts Vulnerable Workers’ Job Prospects Without Reducing Poverty by James Sherk
July 25, 2006 (WebMemo #1176)
Intended to reduce poverty, the minimum wage encourages teenagers to drop out of school and reduces low-income workers’ future job prospects and earnings.
BACK TO TOP
Agriculture Effects
Gallasch, H.F., Jr. 1975. Minimum Wages and the Farm Labor Market. Southern Economic Journal, vol. 41 (January): 480-491.
Finds that the 1967 extension of the minimum wage to the farm labor market, which had previously been uncovered, led to an increase in wages and a reduction in employment.
Gardner, Bruce. 1981. What Have Minimum Wages Done in Agriculture? In Rottenberg (1981a): 210-232.
Finds that extension of the minimum wage to farm workers has increased wages but reduced employment.
BACK TO TOP
Characteristics of Minimum Wage Workers
Employment Policies Institute. 1994. The Low-Wage Workforce. Washington: Employment Policies Institute.
Presents data on characteristics of workers earning the minimum wage.
Kniesner, Thomas J. 1981. The Low-Wage Workers: Who Are They? In Rottenberg (1981a): 459-481.
Finds that 60% of low-wage workers are women and less than 40% are teenagers. Also finds that low wages are not strongly associated with poverty. Less than 25% of low wage workers are heads of households, and only 30% live in families with incomes below the poverty level.
Lang, Kevin. 1995. Minimum Wage Laws and the Distribution of Employment. Washington: Employment Policies Institute Foundation.
Finds that increases in the minimum wage leads fast food establishments to replace adult workers with younger workers, and to replace full-time workers with part-time workers.
"Wage and Employment Dynamics of Minimum Wage Workers," David Macpherson, Southern Economic Journal, January 2002, Vol. 69, No. 3. Pages 676-690.
Abstract: This study uses 20 years of short panel data sets on minimum wage workers to examine the wage and employment dynamics of minimum wage workers. Compared to workers earning above the minimum wage, minimum wage workers differ substantially in several ways. First, minimum wage workers are much more likely to be new entrants and much more likely to exit the labor market. Second, changes in industry and occupation and access to job training are particularly important to improving the wages of minimum wage workers. Finally, we find evidence that many minimum wage workers are earning less than their potential wage temporarily because of other non-work circumstances that make higher paying jobs less attractive.
Links to all of his research
Mellor, Earl F. 1987. Workers at the Minimum Wage or Less: Who They Are and the Jobs They Hold. Monthly Labor Review, vol. 110 (July): 34-38.
Finds that those earning at the minimum wage or less consist largely of young persons and women. The majority worked part-time in services or sales. Since many of these people probably also received commissions or tips, the number of workers earning the minimum wage or less may be overstated.
Mellor, Earl F., and Haugen, Steven E. 1986. Hourly Paid Workers: Who They Are and What They Earn. Monthly Labor Review, vol. 109 (February): 20-26.
Finds that 60% of those earning the minimum wage or less are under age 25 and one-third were teenagers.
Smith, Ralph E., and Vavrichek, Bruce. 1987. The Minimum Wage: Its Relation to Incomes and Poverty. Monthly Labor Review, vol. 110 (June): 24-30.
Finds that 70% of workers earning the minimum wage in 1985 lived in families in which at least one other member held a job. Also, teenagers held almost one-third of all jobs paying the minimum wage.
BACK TO TOP
Economic Impact
Adams, F. Gerard. 1987. Increasing the Minimum Wage: The Macroeconomic Impacts. Briefing Paper, Economic Policy Institute (July).
Finds that an increase in the minimum wage from $3.35 to $4.65 over three years would increase the unemployment rate by less than 0.1% and the inflation rate by 0.2%.
Colberg, Marshall R. 1960. Minimum Wage Effects on Florida's Economic Development. Journal of Law and Economics, vol. 3 (October): 106-117.
Finds that after an increase in the minimum wage unemployment increased most in the areas where wages were lowest and least in areas where wages were highest beforehand.
Linneman, Peter. 1982. The Economic Impacts of Minimum Wage Laws: A New Look at an Old Question. Journal of Political Economy, vol. 90 (June): 443-469.
Finds that the disemployment effects of the minimum wage fall mainly on blacks, females, restricted individuals, residents of small cities, those with low education, the old, and non-union members. Beneficiaries of the minimum wage mainly are males and union members.
McCulloch, J. Huston. 1981. Macroeconomic Implications of the Minimum Wage. In Rottenberg (1981a): 317-326.
Finds negligible effects from the minimum wage on inflation. However, it may reduce the size of the capital stock by reducing profitability in covered industries, thereby leading to lower wages in the long run.
Peterson, John M. 1981. Minimum Wages: Measures and Industry Effects. Washington: American Enterprise Institute.
Calculates the impact of the minimum wage on different industries. The negative employment effects primarily impact low-wage industries such as retailing.
Rottenberg, Simon. 1981a. The Economics of Legal Minimum Wages. Washington: American Enterprise Institute.
Collection of papers.
Stigler, George J. 1946. The Economics of Minimum Wage Legislation. American Economic Review, vol. 36 (June): 358-365.
Argues that a minimum wage will reduce output and decrease the earnings of the poor.
BACK TO TOP
Effects in Other Countries
Bell, Linda. 1997. “The Impact of Minimum Wages in Mexico and Colombia.” Journal of Labor Economics, Vol. 15, No.3, Part 2 (July), pp. S102-S135.
Divergent trends in the real value of the minimum wage in Mexico and Colombia in the 1980s provide an opportunity for evaluating the impact of minimum wages on developing economies. Using panel data for each country, substantial disemployment effects of minimum wages are found in Colombia, where the impact is estimated at roughly 2%-12% over the 1981-87 period. In Mexico, minimum wages have had no effect on wages or employment in the formal sector. The key explanation for the different impact is that the minimum wage is an effective wage in Colombia but not in Mexico.
Campolieti, Michele, Morley Gunderson, and Chris Riddell. 2006. “Minimum Wage Impacts from a Prespecified Research Design: Canada 1981-1997.” Industrial Relations, Vol. 45, No. 2 (April), pp. 195-216.
Neumark (2001) used the novel methodology of a prespecified research design to estimate the employment effect of minimum wage changes. We conducted our analysis in the "spirit" of this methodology based on Canadian data from 1981 to 1997. Our minimum wage elasticities are substantial, typically in the range of −0.14 to −0.44, with −0.30 being a reasonable point estimate, and with the effects being larger after lagged adjustments.
Gindling, T. H., and Katherine Terrell. 2004. “The Effects of Multiple Minimum Wages Throughout the Labor Market.” Discussion Paper No. 1159, IZA, May.
This paper investigates the effects of legal minimum wages on wages, employment, hours worked and monthly earnings among workers covered by minimum wage legislation as well as those for whom it does not apply (the uncovered sector) in Costa Rica. This country's large uncovered sector and complex minimum wage policy, which has for decades set numerous wages throughout the wage distribution, provide a stimulating counterpoint to the U.S. framework for the analysis of the impact of minimum wages. We find that legal minimum wages have a significant positive effect on the wages of workers in the covered sector (with an elasticity of 0.10) but no effect on wages of workers in the uncovered sector. We also find that a 10% increase in minimum wages lowers employment in the covered sector by 1.09% and decreases the average number of hours worked of those who remain in the covered sector by about 0.6%. Finally, we show that despite the wide range of minimum wages, the largest impact on the wages and employment of covered sector workers is in the lower half of the distribution.
Harding, Don, and Glenys Harding. 2004. Minimum Wages in Australia: An Analysis of the Impact on Small and Medium Sized Businesses. Turning Point Research Pty Ltd., Australia.
Harrison, Ann, and Jason Scorse. 2005. “Moving Up or Moving Out? Anti-Sweatshop Activists and Labor Market Outcomes.” NBER Working paper No. 10492.
During the 1990s, human rights and anti-sweatshop activists increased their efforts to improve working conditions and raise wages for workers in developing countries. These campaigns took many different forms: direct pressure to change legislation in developing countries, pressure on firms, newspaper campaigns, and grassroots organizing. This paper analyzes the impact of two different types of interventions on labor market outcomes in Indonesian manufacturing: (1) direct US government pressure, which contributed to a doubling of the minimum wage and (2) anti-sweatshop campaigns. The combined effects of the minimum wage legislation and the anti-sweatshop campaigns led to a 50 percent increase in real wages and a 100 percent increase in nominal wages for unskilled workers at targeted plants. We then examine whether higher wages led firms to cut employment or relocate elsewhere. Although the higher minimum wage reduced employment for unskilled workers, anti-sweatshop activism targeted at textiles, apparel, and footwear plants did not. Plants targeted by activists were more likely to close, but those losses were offset by employment gains at surviving plants. The message is a mixed one: activism significantly improved wages for unskilled workers in sweatshop industries, but probably encouraged some plants to leave Indonesia.
Mangan, John, and John Johnston. 1999. “Minimum Wages, Training Wages and Youth Employment.” International Journal of Social Economics, Vol. 26, No. 1/2/3, January-March, pp. 415-429.
High rates of youth unemployment, worldwide, have led governments to advocate a range of policies designed to increase job offers to young workers. For example, the Australian Government is currently introducing a system of “training wages” which will see effective youth wages set well below adult award wages for a designated training period. This policy is designed to simultaneously increase the human capital of young workers as well as help to overcome the initial barriers to entry into the labour market. However, youth-specific wages have been criticized on the basis of age discrimination and on equity grounds. Also, some US data question the employment-boosting potential of reduced minimum youth wages. In this paper recent international findings on the relationship between youth wages and employment are presented and compared with empirical tests of the relationship using labour market data for Australia as a whole as well as the State of Queensland. The results are used to examine the likely impact of the introduction of the training wage on the youth labour market in Australia and to provide further generalizations on the wider issue of employment and youth-specific wages.
Neumark, David, and William Wascher. 2004. “Minimum Wages, Labor Market Institutions, and Youth Employment: A Cross-National Analysis.” Industrial and Labor Relations Review, Vol. 57, No. 2 (January), pp. 223-48.
The authors estimate the employment effects of changes in national minimum wages using a pooled cross-section time-series data set comprising 17 OECD countries for the period 1975-2000. The average effects they find are consistent with the view that minimum wages cause employment losses among youths. However, the evidence also shows considerable variation across countries. In particular, disemployment effects of minimum wages appear to be smaller in countries that have subminimum wage provisions for youths. Regarding other labor market policies and institutions, the authors find that more restrictive labor standards and higher union coverage strengthen the disemployment effects of minimum wages, while employment protection laws and active labor market policies designed to bring unemployed individuals into the work force help to offset these effects. Overall, the disemployment effects of minimum wages are strongest in the countries with the least regulated labor markets.
Suryahadi, Asep, Wenefrida Widyanti, Daniel Perwira, and Sudarno Sumarto. 2003. “Minimum Wage Policy and Its Impact on Employment in the Urban Formal Sector.” Bulletin of Indonesian Economic Studies, Vol. 39, No. 1 (April), pp. 29-50.The Highs and Lows of the Minimum Wage Effect: A Time-Series Cross-Section Study of the Canadian Law Michael Baker, Dwayne Benjamin, Shuchita Stanger Journal of Labor Economics, Vol. 17, No.2 (Apr., 1999), pp.318-350
Bauer, P.T. 1959. Regulated Wages in Under-developed Countries. In The Public Stake in Union Power, ed. Philip D. Bradley. Charlottesville, VA: University of Virginia Press, 324-349.
Argues that the negative effects of minimum wage laws in LDCs is even greater than in industrialized countries, because there is greater diversity of supply and demand for labor in LDCs. Also points out that in South Africa minimum wages helped whites at the expense of blacks.
Corbo, Vittorio. 1981. The Impact of Minimum Wages on Industrial Employment in Chile. In Rottenberg (1981a): 340-356.
Finds substantial job losses from the minimum wage in Chile.
Freeman, Alida Castillo, and Freeman, Richard B. 1991. Minimum Wages in Puerto Rico: Textbook Case of a Wage Floor? National Bureau of Economic Research Working Paper No. 3759 (June).
Finds that the minimum wage has had a massive impact on the labor market in Puerto Rico.
Gregory, Peter. 1981. Legal Minimum Wages as an Instrument of Social Policy in Less Developed Countries, with Special Reference to Costa Rica. In Rottenberg (1981a): 377-402.
Finds that the minimum wage has been ineffective in reducing income inequality.
The Consequences of Doubling the Minimum Wage: The Case of Indonesia Martin Rama, Industrial and Labor Relations Review, Vol. 54, No. 4 (Jul., 2001) , pp. 864-881
Abstract: Indonesian minimum wages were tripled in nominal terms, and doubled in real terms, in the first half of the 1990s. The author analyzes data from the 1993 labor force survey to evaluate the effects of this hike on wage earnings and wage employment. The results suggest that the minimum wage hike had a modest impact on Indonesian labor market outcomes, increasing average wages by 5-15% and decreasing urban wage employment by 0-5%. The employment effects, however, varied substantially by firm size: small firms apparently experienced substantial decreases in employment, whereas some large firms actually saw their employment increase. Workers in those larger firms, the author concludes, are the evident winners from the minimum wage hike.
Rosa, Jean-Jacques. 1981. The Effect of Minimum Wage Regulation in France. In Rottenberg (1981a): 357-376.
Finds that the minimum wage reduces employment of youth in France, especially males.
Rottenberg, Simon. 1981b. Minimum Wages in Puerto Rico. In Rottenberg (1981a): 327-339.
Finds that the minimum wage has caused massive disemployment in Puerto Rico and lowered the overall standard of living.
BACK TO TOP
Employment/Unemployment Impact
Abowd, John M., Francis Kramarz, and David N. Margolis. 1999. “Minimum Wages and Employment in France and the United States.” Working Paper 6996. National Bureau of Economic Research.
We use longitudinal individual wage and employment data in France and the United States to investigate the effect of changes in the real minimum wage on an individual's employment status. We find that movements in both French and American real minimum wages are associated with mild employment effects in general and very strong effects on workers employed at the minimum wage. In the French case, a 1% increase in the real minimum wage decreases the future employment probability of a man (respectively, a woman) currently employed at the minimum wage by 1.3% (1.0%). In the United States, a decrease in the real minimum wage of 1% increases the probability that a man (woman) employed at the minimum wage came from unemployment in the previous year by 0.4% (1.6%).
Abowd, John M., Francis Kramarz, Thomas Lemieux, and David N. Margolis. 2000. “Minimum Wages and Youth Employment in France and the United States.” In David Blanchflower and Richard Freeman, eds. Youth Employment and Joblessness in Advanced Countries. Pp. 427-72. Chicago: University of Chicago Press.
We use longitudinal individual wage and unemployment data for France and the United States to investigate the effect of intertemporal changes in an individual's status vis-a-vis the real minimum wage on employment transition rates. We find that movements in both French and American real minimum wages are associated with relatively important employment effects in general, and very strong effects on workers employed at the minimum wage.
Bazen, Stephen, and Velayoudom Marimoutou. 2002. “Looking for a Needle in a Haystack? A Reexamination of the Time Series Relationship between Teenage Employment and Minimum Wages in the United States.” Oxford Bulletin of Economics and Statistics. Vol. 64, Supplement, pp. 699-725.
The work of Card and Krueger has cast doubt on the nature of the relationship between the minimum wage and teenage employment in the United States. The earlier 'consensus' finding of a small but statistically significant negative effect was based on time series data whereas Card and Krueger's findings are based mainly on cross-section data. In this article, we re-examine the time series relationship between minimum wage and teenage employment. We find that previous models break down due to their inability to capture changes in the trend, cyclical and seasonal components of teenage employment. We propose an alternative approach in which these components are treated as stochastic components and which contains the traditional, deterministic approach as a special case. The model when estimated up to 1979 accurately predicts what happens to teenage employment subsequently, when the minimum wage was frozen after 1981 and then increased quite substantially in the early 1990s. Moreover, we find that there is a significant, negative effect of the minimum wage on teenage employment and its size has hardly changed during the 1980s and early 1990s.
Burkhauser, Richard V., Kenneth A. Couch, and David C. Wittenburg. 2000. “A Reassessment of the New Economics of the Minimum Wage Literature with Monthly Data from the Current Population Survey.” Journal of Labor Economics. Vol. 18, No. 4 (October), pp. 653-680.
We estimate the employment effects of federal minimum wage increases using monthly Current Population Survey (CPS) data from 1979 through 1997. We find that the empirical differences in the new minimum wage literature based on CPS data primarily can be traced to alternative methods of controlling for macroeconomic conditions. We argue that the macroeconomic controls commonly included in models where no employment impact is found are inappropriate. We consistently find a significant but modest negative relationship between minimum wage increases and teenage employment using alternative controls or allowing employer responses to the policy to occur with some delay.
Currie, Janet, and Bruce Fallick. 1996. “The Minimum Wage and the Employment of Youth: Evidence from the NLSY.” Journal of Human Resources. Vol. 31, No. 2 (Spring), pp. 404-28.
Using panel data on individuals from the National Longitudinal Survey of Youth, we find that employed individuals who were affected by the increases in the federal minimum wage in 1979 and 1980 were about 3 percent less likely to be employed a year later, even after accounting for the fact that workers employed at the minimum wage may differ from their peers in unobserved ways.
Deere, Donald, Kevin M. Murphy, and Finis Welch. 1995. “Employment and the 1990-1991 Minimum-Wage Hike.” American Economic Review Papers and Proceedings. Vol. 85, No. 2 (May), pp. 232-37.
Keil, Manfred, Donald Robertson, and James Symons. 2001. “Minimum Wages and Employment.” CEPR Working Paper No. 497.
This paper investigates the effect of minimum wages on employment using a panel of US state-based data. We estimate a minimalist dynamic version of the specification implied by neo-classical theory. We find statistically and economically significant effects of minimum wages on youth employment. Unlike many other studies we find also significant effects on aggregate state employment. These results re-establish the conventional wisdom as existing before the work of Card-Krueger-Katz. The paper meets the methodological criticisms of this sort of panel study made by CKK. An important econometric innovation in this paper is to produce estimates allowing for cross-sectional correlation, which offers unbiased inference and potential efficiency gains.
Kim, Taeil, and Lowell J. Taylor. 1995. “The Employment Effect in Retail Trade of California’s 1988 Minimum Wage Increase.” Journal of Business and Economic Statistics, vol. 13, No. 2 (April), pp. 175-82.
In this paper, the authors study the outcome of an unusually clean natural experiment--California's large minimum wage increase of 1988. Two different approaches to evaluating the experiment result in the same conclusion: the textbook analysis of minimum wages holds true. In particular, the authors find that employment growth in California's low-wage retail trade industry was slowed by the minimum wage increase.
Neumark, David. 2001. “The Employment Effects of Minimum Wages: Evidence from a Prespecified Research Design.” Industrial Relations, Vol. 40, No. 1, January, pp. 121-44.
This article present sevidence on the employment effects of recent minimum wage increases from a prespecified research design that entailed committing to a detailed set of statistical analyses prior to "going to" the data. The limited data to which the prespecified research design can be applied may preclude finding many significant effects. Nonetheless, the evidence is most consistent with disemployment effects of minimum wages for younger, less-skilled workers.
Neumark, David, and William Wascher. 1992. “Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws.” Industrial and Labor Relations Review. Vol. 46, No.1 (October), pp. 55-81.
Using panel data on state minimum wage laws and economic conditions for the years 1973-89, the authors reevaluate existing evidence on the effects of a minimum wage on employment. Their estimates indicate that a 10% increase in the minimum wage causes a decline of 1-2% in employment among teenagers and a decline of 1.5-2% in employment for young adults, similar to the ranges suggested by earlier time-series studies. The authors also find evidence that youth subminimum wage provisions enacted by state legislatures moderate the disemployment effects of minimum wages on teenagers.
Neumark, David, and William Wascher. 1994. “Employment Effects of Minimum and Subminimum Wages: Reply to Card, Katz, and Krueger.” Industrial and Labor Relations Review. Vol. 47, No. 3 (April), pp. 497-512.
Neumark, David, and William Wascher. 2002. “State-Level Estimates of Minimum Wage Effects: New Evidence and Interpretations from Disequilibrium Models.” Journal of Human Resources. Vol. 37, No. 1 (Winter), pp. 35-62.
Research using state-level data to estimate minimum wage effects on employment follows the textbook treatment of minimum wages, assuming that minimum wages are binding and that labor markets are competitive. We present an alternative method of estimating minimum wage effects using similar data that relaxes these assumptions, using a disequilibrium approach. Applying this approach to the data and sample period used in many earlier state-level studies suggests that simple state-level reduced-form estimates of minimum wage effects on employment depend on the sample used, and may badly understate the disemployment effects of a binding minimum wage.
Orazem, Peter F., and J. Peter Mattila. 2002. “Minimum Wage Effects on Hours, Employment, and Number of Firms: The Iowa Case.” Journal of Labor Research. Vol. 23, No. 1 (Winter), pp. 3-23.
Research on Iowa low-wage retail and service industries supports the view that minimum wages lower employment opportunities for workers. The sample period includes three successive changes in the Iowa minimum wage in 1990, 1991, and 1992, during which time the Iowa rate exceeded the federal minimum wage and that of its surrounding states. Firm-level longitudinal data which separated sub- from superminimum workers yielded employment demand elasticities ranging from -0.3 to -0.7. Hours elasticities were even larger, implying that the increases in minimum wages lowered earnings for subminimum workers. These findings are corroborated by analysis of county-level, two-digit industry data. Minimum wages also reduced the number of firms, but increased average firm size in these industries.
Partridge, Mark D., and Jamie S. Partridge. 1999. “Do Minimum Wage Hikes Reduce Employment? State-Level Evidence from the Low-Wage Retail Sector.” Journal of Labor Research. Vol. 20, No. 3 (Summer), pp. 393-413.
Empirical analysis considers US state level data from the later 1980s, when many states raised their minimum wages above the federal level. Results suggest that an increased minimum wage reduces retail employment in conformity with the standard labour market model. Further analysis indicates that minimum wage hikes also adversely affected total state employment growth, which implies that state minimum wage policies can affect firm and household location.
Sabia, Joseph J. 2006. “The Effect of Minimum Wage Increases on Retail and Small Business Employment.” Employment Policies Institute.
Couch, Kenneth A., and David C. Wittenburg. 2001. “The Response of Hours of Work to Increases in the Minimum Wage.” Southern Economic Journal. Vol. 68, No. 1 (January), pp. 171-77.
This paper examines the effect of minimum wage increases on the hours of work of teenagers (ages 16 to 19) using monthly data from the Current Population Survey. Our findings are consistent with the prediction from neoclassical theory that minimum wage increases have a negative effect on labor demand. However, the estimates we provide here for the elasticity of hours of teen labor demanded with respect to the minimum wage suggest that alternative estimates based on aggregate employment consistently understate the total impact of minimum wage increases on teenage labor utilization.
Keil, Manfred, Donald Robertson, and James Symons. 2001. “Minimum Wages and Employment.” CEPR Working Paper No. 497.
This paper investigates the effect of minimum wages on employment using a panel of US state-based data. We estimate a minimalist dynamic version of the specification implied by neo-classical theory. We find statistically and economically significant effects of minimum wages on youth employment. Unlike many other studies we find also significant effects on aggregate state employment. These results re-establish the conventional wisdom as existing before the work of Card-Krueger-Katz. The paper meets the methodological criticisms of this sort of panel study made by CKK. An important econometric innovation in this paper is to produce estimates allowing for cross-sectional correlation, which offers unbiased inference and potential efficiency gains.
Brown, Charles; Gilroy, Curtis; and Kohen, Andrew. 1982. The Effect of the Minimum Wage on Employment and Unemployment. Journal of Economic Literature, vol. 20 (June): 487-528.
Summarizes a large volume of research on the minimum wage.
Brozen, Yale. 1962. Minimum Wage Rates and Household Workers. Journal of Law and Economics, vol. 5 (October): 103-109.
Found that increases in the minimum wage drove low-wage workers into uncovered occupations, such as household work. Predicts that broadening of coverage to such occupations will increase structural unemployment.
Cox, James C., and Oaxaca, Ronald L. 1986. Minimum Wage Effects With Output Stabilization. Economic Inquiry, vol. 24 (July): 443-453.
Finds that the minimum wage causes unskilled wages to be 15.7% higher than they otherwise would be, and that this causes employment to be 11.2% lower than it otherwise would be.
Currie, Janet, and Fallick, Bruce. 1993. A Note on the New Minimum Wage Research. National Bureau of Economic Research Working Paper No. 4348 (April).
Finds that employed individuals affected by the increases in the minimum wage in 1979 and 1980 were 3% to 4% less likely to be employed a year later. Since the methodology employed is similar to that in Card (1992a and 1992b), it casts doubt on any generalization of his conclusions.
Douty, H.M. 1960. Some Effects of the $1.00 Minimum Wage in the United States. Economica, vol. 27 (May): 137-147.
Finds that the increase in the minimum wage from 75 cents to $1.00 in 1956 did lead to an increase in pay for many workers, but at the cost of jobs. Long-term employment losses by industry ranged from 3.2% to 15%.
Fleisher, Belton M. 1981. Minimum Wage Regulation in Retail Trade. Washington: American Enterprise Institute.
Extension of the minimum wage to retail trade lowered employment in that industry by as much as 500,000, with the main impact on teenagers. Also finds that higher minimum wages led to a scale-back of fringe benefits and training.
McKee, Michael, and West, Edwin G. 1984. Minimum Wage Effects on Part-Time Employment. Economic Inquiry, vol. 22 (July): 421-428.
Finds that the minimum wage discourages part-time employment in favor of full-time jobs.
Neumark, David, Mark Schweitzer, and William Wascher. 2004. "Minimum Wage Effects throughout the Wage Distribution." Journal of Human Resources 39(2): 425-450.
Abstract: This paper provides evidence on a wide set of margins along which labor markets can adjust in response to increases in the minimum wage, including wages, hours, employment, and ultimately labor income. Not surprisingly, the evidence indicates that low-wage workers are most strongly affected, while higher-wage workers are little affected. Workers who initially earn near the minimum wage experience wage gains. Nevertheless, their hours and employment decline, and the combined effect of these changes on earned income suggests adverse consequences, on net, for low-wage workers.
Peterson, John M. 1957. Employment Effects of Minimum Wages, 1938-50. Journal of Political Economy, vol. 65 (October): 412-430.
One of the first empirical studies to show that minimum wages reduce employment.
Peterson, John M., and Stewart, Charles T., Jr. 1969. Employment Effects of Minimum Wage Rates. Washington: American Enterprise Institute.
Summarizes a large number of studies finding negative employment effects from minimum wages.
Phillips, Llad. 1981. Some Aspects of the Social Pathological Behavior Effects of Unemployment among Young People. In Rottenberg (1981a): 174-190.
Finds that primary impact of minimum wage is on young males, especially black males. This has encouraged continued school enrollment and entry into the armed forces. However, it has also encouraged "illegitimate" alternatives to employment, such as crime.
Taylor, Lowell J. 1993. The Employment Effect in Retail Trade of a Minimum Wage: Evidence from California. Washington: Employment Policies Institute. Criticizes Card (1992b).
Criticizes Card (1992b).
Trapani, John M., and Moroney, J.R. 1981. The Impact of Federal Minimum Wage Laws on Employment of Seasonal Cotton farm Workers. In Rottenberg (1981a): 233-246.
Finds that extension of the minimum wage to seasonal cotton workers in 1966 led to a substitution of mechanical processes for labor.
BACK TO TOP
Historical
Grossman, Jonathan. 1978. Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage. Monthly Labor Review, vol. 101 (June): 22-30.
Reviews the legislative history of passage of the first federal minimum wage law. Notes the limited coverage of the initial legislation.
BACK TO TOP
Immigration
Beranek, William. 1982. The Illegal Alien Work Force, Demand for Unskilled Labor, and the Minimum Wage. Journal of Labor Research, vol. 3 (Winter): 89-99.
Finds that the minimum wage increases the employment demand for illegal aliens, who are less likely than legal residents to report violations of the labor laws.
BACK TO TOP
Impact on Income
Behrman, Jere R.; Sickles, Robin C.; and Taubman, Paul. 1983. The Impact of Minimum Wages on the Distributions of Earnings for Major Race-Sex Groups: A Dynamic Analysis. American Economic Review, vol. 73 (September): 766-778.
Finds that the minimum wage has helped white males and females while hurting black males and females.
Datcher, Linda P., and Loury, Glenn C. 1981. The Effect of Minimum Wage Legislation on the Distribution of Family Earnings Among Blacks and Whites. In Minimum Wage Study Commission (1981), vol. 7, pp. 125-146.
Finds that an increase in the minimum wage increases white family incomes more than black family incomes. Also, middle- and high-income families benefit more than low-income families.
Grossman, Jean B. 1983. The Impact of the Minimum Wage on Other Wages. Journal of Human Resources, vol. 18 (Summer): 359-378.
Finds that an increase in the minimum wage increases wages of those above the minimum wage for two reasons. First, workers above the minimum will want to restore their relative wage position, and second there will be increased demand for workers above the minimum to do the work previously done by those below the minimum.
Bell, Carolyn Shaw. 1981. Minimum Wages and Personal Income. In Rottenberg (1981a): 429-458.
Finds that increases in the minimum wage would benefit few families with incomes below the poverty level. Much of the benefit would accrue to upper income families with secondary earners, such as wives and children.
Johnson, William R., and Browning, Edgar K. 1981. Minimum Wages and the Distribution of Income. In Minimum Wage Study Commission (1981), vol. 7, pp. 31-58.
Finds that much of the benefits of a higher minimum wage accrue to high-income families and that many low-income families benefit at the expense of other low-income families.
Johnson, William R., and Browning, Edgar K. 1983. The Distributional and Efficiency Effects of Increasing the Minimum Wage: A Simulation. American Economic Review, vol. 73 (March): 204-211.
Finds that a 22% increase in the minimum wage in 1976 would have increased the incomes of the lowest 10% of households by just $200 million.
David Macpherson and William Evan, "Wage Growth Among Minimum Wage Workers," The Employment Policies Institute, June 2004
Finds that minimum wage jobs are entry level positions, and as workers gain skill on the job they also earn raises. A year later the median minimum wage worker earns ten percent higher wages, a consequence of the fact that two-thirds of minimum wage workers earn raises within a year.
PDF version
BACK TO TOP
Long Term Effects
Brozen, Yale. 1969. The Effect of Statutory Minimum Wage Increases on Teen-age Employment. Journal of Law and Economics, vol. 12 (April): 109-122.
Finds that increases in the minimum wage only speed up wage increases that would have occurred over time. However, in the interval between an increase and the time when productivity catches up to it results in higher unemployment and business failures. In the case of teenagers, many who are barred from jobs suffer long-term effects from the failure to gain job skills, thus injuring them permanently.
Feldstein, Martin. 1973. The Economics of the New Unemployment. The Public Interest (Fall): 14-15.
Argues that the minimum wage prevents many young people from accepting jobs that would provide them with on-the-job training, thus contributing to long-term unemployment.
David Neumark and Olena Nizalova, “Minimum Wage Effects in the Longer Run,” National Bureau of Economic Research Working Paper No. w10656, June 2004.
Abstract: Exposure to minimum wages at young ages may lead to longer-run effects. Among the possible adverse longer-run effects are decreased labor market experience and accumulation of tenure, lower current labor supply because of lower wages, and diminished training and skill acquisition. Beneficial longer-run effects could arise if minimum wages increase skill acquisition, or if short-term wage increases are long-lasting. We estimate the longer-run effects of minimum wages by using information on the minimum wage history that workers have faced since potentially entering the labor market. The evidence indicates that even as individuals reach their late 20's, they work less and earn less the longer they were exposed to a higher minimum wage, especially as a teenager. The adverse longer-run effects of facing high minimum wages as a teenager are stronger for blacks. From a policy perspective, these longer-run effects of minimum wages are likely more significant than the contemporaneous effects of minimum wages on youths that are the focus of most research and policy debate.
BACK TO TOP
Overtime
Ehrenberg, Ronald G., and Schumann, Paul L. 1981. The Overtime Pay Provisions of the Fair Labor Standards Act. In Rottenberg (1981a): 264-295.
Opposes restrictions on mandatory overtime.
BACK TO TOP
Poverty
Burkhauser, Richard V., and Joseph J. Sabia. Raising the Minimum Wage: Another Empty Promise to the Working Poor. Washington, DC: Employment Policies Institute, 2005.
Available online: http://www.epionline.org/study_detail.cfm?sid=87
Finds that minimum wage increases do not primarily benefit low-income families or help lift them out of poverty.
Vedder, Richard K., and Lowell E. Gallaway. Does the Minimum Wage Reduce Poverty? Washington, DC: Employment Policies Institute, 2001.
Available online: http://www.epionline.org/study_detail.cfm?sid=31
Finds that minimum wage increases do not reduce poverty rates.
Bonilla, Carlos E. 1992. Higher Wages, Greater Poverty. Washington: Employment Policies Institute.
Finds that the 1991 increase in the federal minimum wage actually reduced the income of some single parents, after welfare and taxes are taken into account.
Brandon, Peter D. 1995. Jobs Taken by Mothers Moving from Welfare to Work and the Effects of Minimum Wages on this Transition. Washington: Employment Policies Institute Foundation.
Finds a decrease in work by women on welfare in states raising their minimum wages and an increase in time on welfare in such states.
Brown, Charles. 1988. Minimum Wage Laws: Are They Overrated? Journal of Economic Perspectives, vol. 2 (Summer): 133-145.
Finds that they employment impact of the minimum wage and its impact on reducing poverty are both less than generally believed.
Kohen, Andrew I., and Gilroy, Curtis L. 1981. The Minimum Wage, Income Distribution, and Poverty. In Minimum Wage Study Commission (1981), vol. 7, pp. 1-30.
Since many low-wage workers live in high-income families, increasing the minimum wage is an ineffective way of increasing the incomes of poor families.
Leffler, Keith B. 1978. Minimum Wages, Welfare, and Wealth Trans-fers to the Poor. Journal of Law and Economics, vol. 21 (October): 345-358.
Finds that increases in the minimum wage lead to increases in welfare rolls. Argues that advocates for the poor may favor higher minimum wages in order to increase the number of people on welfare, because welfare benefits may exceed the income from work.
Mincy, Ronald B. 1990. Raising the Minimum Wage: Effects on Family Poverty. Monthly Labor Review, vol. 113 (July): 18-25.
Finds a significant impact on reducing poverty from an increase in the minimum wage. This is because the disemployment impact falls mainly on teenagers, whose contribution to family income is small.
Parsons, Donald O. 1980. Poverty and the Minimum Wage. Washington: American Enterprise Institute.
Finds that the minimum wage mainly reallocates income among low-wage workers, benefiting adult females and hurting teenagers of both sexes.
Neumark, David and William Wascher. "Do Minimum Wages Fight Poverty?," Economic Inquiry, 2002, v40(3,Jul), 315-333.
Abstract: The primary goal of a national minimum wage floor is to raise the incomes of poor or near-poor families with members in the work force. However, estimates of employment effects of minimum wages tell us little about whether minimum wages are can achieve this goal; even if the disemployment effects of minimum wages are modest, minimum wage increases could result in net income losses for poor families. We present evidence on the effects of minimum wages on family incomes from matched March CPS surveys, focusing on the effectiveness of minimum wages in reducing poverty. The results show that over a one-to-two year period, minimum wages increase both the probability that poor families escape poverty and the probability that previously non-poor families fall into poverty. The estimated increase in the number of non-poor families that fall into poverty is larger than the estimated increase in the number of poor families that escape poverty, though this difference is not statistically significant. We also find that minimum wages tend to boost the incomes of poor families that remain below the poverty line. The evidence indicates that in the wake of minimum wage increases, some families gain and others lose. On net, the various tradeoffs created by minimum wage increases more closely resemble income redistribution among low-income families than income redistribution from high- to low-income families. Given these findings it is difficult to make a distributional or equity argument for minimum wages.
Neumark, David, Mark Schweitzer, and William Wascher. 2005. “The Effects of Minimum Wages on the Distribution of Family Incomes: A Nonparametric Analysis.” Journal of Human Resources 40(4): 867-894.
Abstract: An oft-stated goal of the minimum wage is to raise incomes of poor or low-income families. We present nonparametric estimates of the effects of minimum wages on the distribution of family income relative to needs in the United States. Although minimum wages increase the incomes of some poor families, the evidence indicates that their overall net effect is, if anything, to increase the proportions of families with incomes below or near the poverty line. It would appear that reductions in the proportions of families that are poor or near-poor should not be counted among the potential benefits of minimum wages.
