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Minimum Wage and Individual Worker Productivity: Evidence from a Large US Retailer

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  • Decio Coviello
  • Erika Deserranno
  • Nicola Persico

Abstract

We study workers who are employed by a large US retailer, work in many store locations, and are paid based on performance. By means of a border-discontinuity analysis, we document that workers become more productive and are terminated less often after a minimum wage increase. These effects are stronger among workers whose pay is more often supported by the minimum wage. However, when workers are monitored less intensely, the minimum wage depresses productivity. We interpret these findings through an efficiency wage model. After a minimum wage increase, profits decrease, and a calibration exercise suggests that worker welfare increases.

Suggested Citation

  • Decio Coviello & Erika Deserranno & Nicola Persico, 2022. "Minimum Wage and Individual Worker Productivity: Evidence from a Large US Retailer," Journal of Political Economy, University of Chicago Press, vol. 130(9), pages 2315-2360.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/720397
    DOI: 10.1086/720397
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    Cited by:

    1. Kunaschk, Max, 2024. "The effects of minimum wages on employment and prices—Evidence from the hairdressing sector," Labour Economics, Elsevier, vol. 88(C).
    2. Arindrajit Dube & Attila Lindner, 2024. "Minimum Wages in the 21st Century," RF Berlin - CReAM Discussion Paper Series 2524, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    3. Nicolás Francisco Abbate & Bruno Jimnez, 2022. "Do Minimum Wage Hikes Lead to Employment Destruction? Evidence from a Regression Discontinuity Design in Argentina," Asociación Argentina de Economía Política: Working Papers 4533, Asociación Argentina de Economía Política.
    4. Meiselbach, Mark K. & Abraham, Jean M., 2023. "Do minimum wage laws affect employer-sponsored insurance provision?," Journal of Health Economics, Elsevier, vol. 92(C).
    5. Clemens, Jeffrey, 2024. "Minimum Wage Hikes Bring Tradeoffs beyond Pay and Jobs," MPRA Paper 121748, University Library of Munich, Germany.
    6. Arabzadeh, Hamzeh & Balleer, Almut & Gehrke, Britta & Taskin, Ahmet Ali, 2024. "Minimum wages, wage dispersion and financial constraints in firms," European Economic Review, Elsevier, vol. 163(C).
    7. Birca Alic, 2024. "Minimum Wage - A Determininant Of Ensuring Sustainable Employment In The Republic Of Moldova," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 132-141, August.
    8. Priyaranjan Jha & David Neumark & Antonio Rodriguez-Lopez, 2022. "What's Across the Border? Re-Evaluating the Cross-Border Evidence on Minimum Wage Effects," CESifo Working Paper Series 9746, CESifo.
    9. Tan, Weiqiang & Xie, Chenxin & Ye, Dezhu, 2024. "Do urban educational resources affect corporate labor costs?," Economic Modelling, Elsevier, vol. 130(C).
    10. Wang, Maolin & Lin, Huiting & Huang, Yehua & Lu, Huiyan, 2023. "Poverty alleviation and firm productivity: Evidence from China's minimum wage system," International Review of Financial Analysis, Elsevier, vol. 87(C).
    11. Hill, Seth J, 2023. "Minimum Wages and Homelessness," OSF Preprints z2fqj, Center for Open Science.
    12. Sebastian Link, 2019. "The Price and Employment Response of Firms to the Introduction of Minimum Wages," CESifo Working Paper Series 7575, CESifo.
    13. Regmi, Krishna, 2024. "Minimum Wages and the Uptake of Supplemental Security Income," IZA Discussion Papers 17074, Institute of Labor Economics (IZA).
    14. Matthew T. Gustafson & Jason D. Kotter, 2023. "Higher Minimum Wages Reduce Capital Expenditures," Management Science, INFORMS, vol. 69(5), pages 2933-2953, May.

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