IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/17026.html
   My bibliography  Save this paper

What is the optimal minimum wage?

Author

Listed:
  • Chen, Yujiang River
  • Teulings, Coen

Abstract

The extensive literature on minimum wages has found evidence for the compression of relative wages and mixed results for employment. This literature has been plagued by a number of problems. First, the median-minimum wage ratio is used as the independent variable, where the median is endogenous. Second, it is difficult to disentangle compression of relative wages and truncation due to employment effects. Third, all effects are likely to depend on the initial level of the minimum. Fourth, employment effects are likely to differ between worker types. We offer solutions for these problems, by using instruments for the median, by using data on personal characteristics, and by using a flexible specification. We apply our method to US data starting from 1979, allowing for a wide variation in minimum wages. We find strong compression and positive employment effects for the lower half of the distribution, persisting for quite high levels of the minimum.

Suggested Citation

  • Chen, Yujiang River & Teulings, Coen, 2022. "What is the optimal minimum wage?," CEPR Discussion Papers 17026, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17026
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP17026
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Minimum wages; Us; Employment effects; Wage dispersion; Wage share;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

    Statistics

    Access and download statistics

    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:cpr:ceprdp:17026. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: the person in charge (email available below). General contact details of provider: https://www.cepr.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.