IDEAS home Printed from https://ideas.repec.org/a/bba/j00001/v3y2024i3p126-137d219.html
   My bibliography  Save this article

Inflation’s Reduction of the Real Minimum Wage and Unemployment in the USA: 1987 to 2021

Author

Listed:
  • Jonathan E. Leightner

    (Hull College of Business, Augusta University, Augusta, Georgia, USA)

  • Eric Jenkins

    (Hull College of Business, Augusta University, Augusta, Georgia, USA)

Abstract

Hundreds of articles have been written that include empirical estimates of the dis-employment effects of minimum wages; however, many of these articles find statistically insignificant effects, some find significant negative effects, and a few find significant positive effects. Most of these studies use multivariate analyses which can be criticized for omitting key variables. The omitted variables problem ruins all statistics and estimates. This paper uses reiterative truncated projected least squares (RTPLS), a solution to the omitted variables problem, to estimate the percentage increase in unemployment due to a one percent increase in the real minimum wage using monthly data for the 50 states of the USA from 1987 to 2021. RTPLS produces a separate elasticity for every observation where differences in these estimates are due to omitted variables. We argue that RTPLS solves most of the econometric problems that David Neumark identified in his keynote address at a minimum wage conference in Berlin in 2018. We find that the percentage change in the unemployment rate due to a one percent change in the minimum wage ranges between 1.156 and 3.389, that the elasticities for different states tend to move together over time, and that all these elasticities are statistically significant at a 95 percent confidence level.

Suggested Citation

  • Jonathan E. Leightner & Eric Jenkins, 2024. "Inflation’s Reduction of the Real Minimum Wage and Unemployment in the USA: 1987 to 2021," Journal of Economic Analysis, Anser Press, vol. 3(3), pages 126-137, September.
  • Handle: RePEc:bba:j00001:v:3:y:2024:i:3:p:126-137:d:219
    as

    Download full text from publisher

    File URL: https://www.anserpress.org/journal/jea/3/3/69/pdf
    Download Restriction: no

    File URL: https://www.anserpress.org/journal/jea/3/3/69
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Neumark David, 2019. "The Econometrics and Economics of the Employment Effects of Minimum Wages: Getting from Known Unknowns to Known Knowns," German Economic Review, De Gruyter, vol. 20(3), pages 293-329, August.
    2. Hristos Doucouliagos & T. D. Stanley, 2009. "Publication Selection Bias in Minimum‐Wage Research? A Meta‐Regression Analysis," British Journal of Industrial Relations, London School of Economics, vol. 47(2), pages 406-428, June.
    3. Megan Linde Leonard & T. D. Stanley & Hristos Doucouliagos, 2014. "Does the UK Minimum Wage Reduce Employment? A Meta-Regression Analysis," British Journal of Industrial Relations, London School of Economics, vol. 52(3), pages 499-520, September.
    4. William E. Even & David A. Macpherson, 2019. "Where Does the Minimum Wage Bite Hardest in California?," Journal of Labor Research, Springer, vol. 40(1), pages 1-23, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David Neumark & Peter Shirley, 2022. "Myth or measurement: What does the new minimum wage research say about minimum wages and job loss in the United States?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 61(4), pages 384-417, October.
    2. Balázs Égert & Jarmila Botev & Dave Turner & Balazs Egert, 2024. "Minimum Wages at a Turning Point?," CESifo Working Paper Series 11586, CESifo.
    3. Salverda Wiemer, 2025. "The Netherlands’ Minimum Wage 1969–2022: Can We Learn from Decline?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 245(1-2), pages 45-78.
    4. Mario Bossler & Michael Oberfichtner & Claus Schnabel, 2020. "Employment Adjustments Following Rises and Reductions in Minimum Wages: New Insights From a Survey Experiment," LABOUR, CEIS, vol. 34(3), pages 323-346, September.
    5. Alan Manning, 2021. "The Elusive Employment Effect of the Minimum Wage," Journal of Economic Perspectives, American Economic Association, vol. 35(1), pages 3-26, Winter.
    6. Alexandros Karakitsios & Manos Matsaganis, 2018. "Minimum Wage Effects on Poverty and Inequality," DEOS Working Papers 1801, Athens University of Economics and Business.
    7. repec:wly:econjl:v::y:2017:i:605:p:f236-f265 is not listed on IDEAS
    8. Neumark, David & Munguía Corella, Luis Felipe, 2021. "Do minimum wages reduce employment in developing countries? A survey and exploration of conflicting evidence," World Development, Elsevier, vol. 137(C).
    9. Tomas Kucera, 2020. "Are Employment Effects of Minimum Wage the Same Across the EU? A Meta-Regression Analysis," Working Papers IES 2020/2, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jan 2020.
    10. Florin Vadean & Stephen Allan, 2021. "The Effects of Minimum Wage Policy on the Long‐Term Care Sector in England," British Journal of Industrial Relations, London School of Economics, vol. 59(2), pages 307-334, June.
    11. Arango, Luis E. & Rivera, Sergio A., 2022. "Moderate wage increases and flexible labour contracts to protect employment in Colombian manufacturing," Journal of Policy Modeling, Elsevier, vol. 44(3), pages 578-598.
    12. Bruttel, Oliver, 2019. "The effects of the new statutory minimum wage in Germany: a first assessment of the evidence," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 53(1), pages 1-10.
    13. Pestel, Nico & Bonin, Holger & Isphording, Ingo E. & Gregory, Terry & Caliendo, Marco, 2020. "Auswirkungen des gesetzlichen Mindestlohns auf Beschäftigung und Arbeitslosigkeit," IZA Research Reports 95, Institute of Labor Economics (IZA).
    14. Maho Hatayama, 2022. "Revisiting Labor Market Regulations in the Middle East and North Africa," World Bank Publications - Reports 36887, The World Bank Group.
    15. Winters, John V., 2022. "Minimum Wages and Restaurant Employment for Teens and Adults in Metropolitan and Non-metropolitan Areas," IZA Discussion Papers 15499, Institute of Labor Economics (IZA).
    16. Carolin Linckh & Caroline Neuber-Pohl & Harald Pfeifer, 2023. "The employment effects of raising negotiated minimum wages for apprentices," Economics of Education Working Paper Series 0202, University of Zurich, Department of Business Administration (IBW).
    17. Antoine Cazals & Pierre Mandon, 2015. "Political Budget Cycles: Manipulation of Leaders or Bias from Research? A Meta-Regression Analysis," CERDI Working papers halshs-01238883, HAL.
    18. Markus Hang & Jerome Geyer‐Klingeberg & Andreas Rathgeber & Stefan Stöckl, 2018. "Economic Development Matters: A Meta‐Regression Analysis on the Relation between Environmental Management and Financial Performance," Journal of Industrial Ecology, Yale University, vol. 22(4), pages 720-744, August.
    19. Ernest Boffy-Ramirez, 2022. "Push or Pull? Measuring the labor supply response to the minimum wage using an individual-level panel," Applied Economics, Taylor & Francis Journals, vol. 54(35), pages 4043-4059, July.
    20. Antoine Cazals & Pierre Mandon, 2016. "Political Budget Cycles: Manipulation from Leaders or Manipulation from Researchers? Evidence from a Meta-Regression Analysis," Working Papers halshs-01320586, HAL.
    21. Boffy-Ramirez, Ernest, 2019. "The Short-Run Effects of the Minimum Wage on Employment and Labor Market Participation: Evidence from an Individual-Level Panel," IZA Discussion Papers 12137, Institute of Labor Economics (IZA).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bba:j00001:v:3:y:2024:i:3:p:126-137:d:219. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ramona Wang (email available below). General contact details of provider: https://www.anserpress.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.