The Effect of Minimum Wages on Low-Wage Jobs—Cengiz 2019

We use 138 state-level minimum wage increases between 1979 and 2016 to evaluate the effect of minimum wages on low-paid occupations. First, we assess the minimum wage's effect on employment by hourly pay bin. We next compare the number of jobs paying at or above the new minimum wage to the missing ones paying below it to deduce the employment effect. In the five years after the increase, the number of low-wage positions remained stable. Simultaneously, minor wage spillovers at the bottom of the wage distribution enhanced the minimum wage's direct effect on average earnings. Our demographic data reveal that labor-labor substitution at the bottom of the wage distribution cannot explain the lack of employment loss. Higher minimum salaries don't cause unemployment, either. However, tradeable sector employment has fallen. Decomposing the overall employment effect by salary bins allows for transparent plausibility assessments.

Cengiz, D., Dube, A., Lindner, A., & Zipperer, B. (2019). The effect of minimum wages on low-wage jobs. The Quarterly Journal of Economics, 134(3), 1405-1454.