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Spillover Effects from Voluntary Employer Minimum Wages

Author

Listed:
  • Ellora Derenoncourt

    (Princeton Unviersity)

  • Clemens Noelke

    (Brandeis University)

  • David Weil

    (Brandeis University)

  • Bledi Taska

    (Emsi Burning Glass)

Abstract

Low unionization rates, a falling real federal minimum wage, and outsourcing have hampered wage growth in the low-wage sector in the US. In recent years, a number of private employers have opted to institute or raise company-wide minimum wages for their employees, sometimes in response to public pressure. To what extent do wage-setting changes at major employers spill over to other employers, and what are the broader labor market effects of these policies? In this paper, we study recent minimum wages by Amazon, Walmart, Target, CVS, and Costco using data from millions of online job ads and employee surveys. We document that these policies induced wage increases at low-wage jobs at other employers, where the modal response was to match the wage announced by the large retailer. In the case of Amazon’s $15 minimum wage in October 2018, our estimates imply that a 10% increase in Amazon’s advertised hourly wages led to an average increase of 2.3% among other employers in the same commuting zone. Using the CPS, we estimate wage increases in exposed jobs in line with our magnitudes from employee surveys and find that large employer minimum wage policies led to small but precisely estimated declines in employment, with employment elasticities ranging from -0.04 to -0.13. Large employer minimum wage announcements influenced wages more broadly. The magnitude of these wage spillovers cannot easily be explained by standard competitive pressures, suggesting a role for both market power and norms in wage determination.

Suggested Citation

  • Ellora Derenoncourt & Clemens Noelke & David Weil & Bledi Taska, 2021. "Spillover Effects from Voluntary Employer Minimum Wages," Working Papers 2021-1, Princeton University. Economics Department..
  • Handle: RePEc:pri:econom:2021-1
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    Citations

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    Cited by:

    1. Bai, Yihong & Kim, Chungah & Chum, Antony, 2023. "Impact of the minimum wage increase on smoking behaviour: A quasi-experimental study in South Korea," Social Science & Medicine, Elsevier, vol. 333(C).
    2. Demir, Gökay, 2023. "Labor Market Frictions and Spillover Effects from Publicly Announced Sectoral Minimum Wages," IZA Discussion Papers 16204, Institute of Labor Economics (IZA).
    3. Legal, Diego & Young, Eric R., 2024. "The effect of minimum wages on consumer bankruptcy," Journal of Economics and Business, Elsevier, vol. 129(C).
    4. Honey Batra & Amanda M. Michaud & Simon Mongey, 2023. "Online Job Posts Contain Very Little Wage Information," Opportunity and Inclusive Growth Institute Working Papers 083, Federal Reserve Bank of Minneapolis.
    5. Calderón, Mariana & Cortés, Josué & Pérez Pérez, Jorge & Salcedo, Alejandrina, 2023. "Disentangling the Effects of Large Minimum Wage and VAT Changes on Prices: Evidence from Mexico," Labour Economics, Elsevier, vol. 80(C).
    6. Demir, Gökay, 2022. "Labor market frictions and spillover effects from publicly announced sectoral minimum wages," Ruhr Economic Papers 985, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    7. Gihleb, Rania & Giuntella, Osea & Tan, Jian Qi, 2023. "The Impact of Right-to-Work Laws on Long Hours and Work Schedules," IZA Discussion Papers 16588, Institute of Labor Economics (IZA).
    8. Reyes, Germán, 2024. "Coarse Wage-Setting and Behavioral Firms," IZA Discussion Papers 17039, Institute of Labor Economics (IZA).
    9. Datta, Nikhil & Machin, Stephen, 2024. "Government Contracting and Living Wages > Minimum Wages," IZA Discussion Papers 17117, Institute of Labor Economics (IZA).
    10. Germ'an Reyes, 2022. "Coarse Wage-Setting and Behavioral Firms," Papers 2206.01114, arXiv.org, revised Mar 2024.
    11. Taeyoung Doh & Kyoo il Kim & Sungil Kim & Hwanoong Lee & Kyungho Song, 2022. "The Economic Effects of a Rapid Increase in the Minimum Wage: Evidence from South Korea Experiments," Research Working Paper RWP 22-13, Federal Reserve Bank of Kansas City.
    12. Nikhil Datta, 2023. "The measure of monopsony: the labour supply elasticity to the firm and its constituents," CEP Discussion Papers dp1930, Centre for Economic Performance, LSE.
    13. Datta, Nikhil, 2023. "The measure of monopsony: the labour supply elasticity to the firm and its constituents," LSE Research Online Documents on Economics 121312, London School of Economics and Political Science, LSE Library.

    More about this item

    Keywords

    Voluntary minimum wages; wage spillovers; employer wage-setting power;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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