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The Effects of Minimum Wages over the Business Cycle

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  • Joseph Sabia

Abstract

This study examines whether the low-skilled employment effects of minimum wage increases differ over the state business cycle. Controlling for spatial heterogeneity via state-specific productivity shocks to the low-skilled sector and state-specific non-linear time trends, the results suggest that minimum wage increases between 1989 and 2012 reduce low-skilled employment more during recessions than expansions. Estimated employment elasticities with respect to the minimum wage range from 0 to −0.2 during state economic expansions, but reach as high as −0.3 during troughs in the business cycle. Copyright Springer Science+Business Media New York 2014

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  • Joseph Sabia, 2014. "The Effects of Minimum Wages over the Business Cycle," Journal of Labor Research, Springer, vol. 35(3), pages 227-245, September.
    • Handle: RePEc:spr:jlabre:v:35:y:2014:i:3:p:227-245
    DOI: 10.1007/s12122-014-9180-x
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    References listed on IDEAS

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    1. Sylvia A. Allegretto & Arindrajit Dube & Michael Reich, 2011. "Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 50(2), pages 205-240, April.
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    3. Joseph J. Sabia & Richard V. Burkhauser & Benjamin Hansen, 2012. "Are the Effects of Minimum Wage Increases Always Small? New Evidence from a Case Study of New York State," ILR Review, Cornell University, ILR School, vol. 65(2), pages 350-376, April.
    4. Neumark, David & Wascher, William L., 2007. "Minimum Wages and Employment," Foundations and Trends(R) in Microeconomics, now publishers, vol. 3(1–2), pages 1-182, March.
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    6. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    7. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
    8. Addison, John T. & Blackburn, McKinley L. & Cotti, Chad D., 2009. "Do minimum wages raise employment? Evidence from the U.S. retail-trade sector," Labour Economics, Elsevier, vol. 16(4), pages 397-408, August.
    9. Addison, John T. & Blackburn, McKinley L. & Cotti, Chad D., 2013. "Minimum wage increases in a recessionary environment," Labour Economics, Elsevier, vol. 23(C), pages 30-39.
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    Cited by:

    1. Lance Wescher & Travis Hutchinson & Anna Rannou, 2019. "Minimum Wages, Employment, and College Enrollment," The American Economist, Sage Publications, vol. 64(1), pages 3-18, March.
    2. David Maré & Dean Hyslop, 2021. "Minimum Wages in New Zealand: Policy and practice in the 21st century," Working Papers 21_03, Motu Economic and Public Policy Research.
    3. Chu, Angus C. & Kou, Zonglai & Wang, Xilin, 2020. "Dynamic effects of minimum wage on growth and innovation in a Schumpeterian economy," Economics Letters, Elsevier, vol. 188(C).
    4. Sebastian Fossati & Joseph Marchand, 2024. "First to $15: Alberta’s Minimum Wage Policy on Employment by Wages, Ages, and Places," ILR Review, Cornell University, ILR School, vol. 77(1), pages 119-142, January.
    5. Fossati, Sebastian & Marchand, Joseph, 2020. "First to $15: Alberta's Minimum Wage Policy on Employment by Wages, Ages, and Places," Working Papers 2020-15, University of Alberta, Department of Economics, revised 27 Jul 2023.
    6. Brandyn F. Churchill & Joseph J. Sabia, 2019. "The Effects of Minimum Wages on Low‐Skilled Immigrants’ Wages, Employment, and Poverty," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 58(2), pages 275-314, April.
    7. Fone, Zachary S. & Sabia, Joseph J. & Cesur, Resul, 2023. "The unintended effects of minimum wage increases on crime," Journal of Public Economics, Elsevier, vol. 219(C).
    8. Joseph Marchand, 2017. "Thinking about Minimum Wage Increases in Alberta: Theoretically, Empirically, and Regionally," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 491, pages 1-20, September.
    9. Zachary S. Fone & Joseph J. Sabia & Resul Cesur, 2019. "Do Minimum Wage Increases Reduce Crime?," NBER Working Papers 25647, National Bureau of Economic Research, Inc.
    10. Garth Heutel & Christopher J. Ruhm, 2016. "Air Pollution and Procyclical Mortality," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(3), pages 667-706.
    11. Joseph J. Sabia & Richard V. Burkhauser & Taylor Mackay, 2018. "Minimum Cash Wages, Tipped Restaurant Workers, and Poverty," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 57(4), pages 637-670, October.
    12. Laura Argys & M. Melinda Pitts & Joseph J. Sabia, 2014. "Do Minimum Wages Really Increase Youth Drinking and Drunk Driving?," FRB Atlanta Working Paper 2014-20, Federal Reserve Bank of Atlanta.
    13. Luke G. Fitzpatrick, 2018. "Surface Coal Mining and Human Health: Evidence from West Virginia," Southern Economic Journal, John Wiley & Sons, vol. 84(4), pages 1109-1128, April.
    14. Hyunbae Chun & Jungmin Lee & Donghan Shin, 2024. "Does the Minimum Wage Affect Non-wage Workers?," Korean Economic Review, Korean Economic Association, vol. 40, pages 5-47.
    15. Medrano-Adán, Luis & Salas-Fumás, Vicente, 2023. "Do minimum wages deliver what they promise? Effects of minimum wage on employment, output, and income inequality from occupational choice theory," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 366-383.
    16. Congressional Budget Office, 2019. "The Effects on Employment and Family Income of Increasing the Federal Minimum Wage," Reports 55410, Congressional Budget Office.
    17. Joseph J. Sabia, 2015. "Do minimum wages stimulate productivity and growth?," IZA World of Labor, Institute of Labor Economics (IZA), pages 221-221, December.
    18. Richard V. Burkhauser & Drew McNichols & Joseph J. Sabia, 2023. "Minimum Wages and Poverty: New Evidence from Dynamic Difference-in-Differences Estimates," NBER Working Papers 31182, National Bureau of Economic Research, Inc.

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