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Real and permanent minimum wages

Author

Listed:
  • Michael R. Strain

    (American Enterprise Institute)

  • Peter Brummund

    (American Enterprise Institute)

Abstract

We study heterogeneity in minimum wage policy design and in the employment effects of minimum wage increases. Specifically, we study whether indexing minimum wages to inflation and differences in county-level wages and mobility rates lead to heterogenous employment effects following minimum wage increases. We find evidence that they do. To the best of our knowledge, this paper is the first to empirically study inflation indexing. Our preferred specifications imply that the disemployment effect of indexing minimum wages to inflation is over 2.5 times the magnitude of the disemployment effect associated with nominal minimum wage increases. We also find variance in the effect of minimum wage increases on employment across low- and high-wage counties -- employment in low-wage counties is considerably more sensitive to minimum wage increases than employment in high-wage counties. And we provide preliminary evidence that less mobile counties have larger disemployment effects from minimum wage increases than higher mobility counties.

Suggested Citation

  • Michael R. Strain & Peter Brummund, 2016. "Real and permanent minimum wages," AEI Economics Working Papers 875967, American Enterprise Institute.
    • Handle: RePEc:aei:rpaper:875967
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    References listed on IDEAS

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    1. Jeffrey Clemens, 2015. "The Minimum Wage and the Great Recession: Evidence from the Current Population Survey," NBER Working Papers 21830, National Bureau of Economic Research, Inc.
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    5. Brown, Charles, 1999. "Minimum wages, employment, and the distribution of income," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 32, pages 2101-2163, Elsevier.
    6. François Rycx & Andrea Garnero & Stephan Kampelmann, 2015. "Sharp Teeth or Empty Mouths ?Revisiting the Minimum Wage Bite with Sectoral Data," ULB Institutional Repository 2013/245666, ULB -- Universite Libre de Bruxelles.
    7. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
    8. Raj Chetty & Nathaniel Hendren & Patrick Kline & Emmanuel Saez, 2014. "Where is the land of Opportunity? The Geography of Intergenerational Mobility in the United States," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(4), pages 1553-1623.
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    Cited by:

    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. Jeffrey Clemens & Michael R. Strain, 2017. "Estimating the Employment Effects of Recent Minimum Wage Changes: Early Evidence, an Interpretative Framework, and a Pre-Commitment to Future Analysis," NBER Working Papers 23084, National Bureau of Economic Research, Inc.
    3. Clemens, Jeffrey, 2017. "The Minimum Wage and the Great Recession: A Response to Zipperer and Recapitulation of the Evidence," MPRA Paper 80153, University Library of Munich, Germany.
    4. Jeffrey Clemens & Michael R. Strain, 2018. "The Short‐Run Employment Effects Of Recent Minimum Wage Changes: Evidence From The American Community Survey," Contemporary Economic Policy, Western Economic Association International, vol. 36(4), pages 711-722, October.

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    Keywords

    Minimum Wage;

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    • A - General Economics and Teaching

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