Revisiting the minimum wage-employment debate: Throwing out the baby with the bathwater?

David Neumark, J. M.Ian Salas, William Wascher

Research output: Contribution to journalArticlepeer-review

Abstract

The authors revisit the long-running minimum wage-employment debate to assess new studies claiming that estimates produced by the panel data approach commonly used in recent minimum wage research are flawed by that approach's failure to account for spatial heterogeneity. The new studies use research designs intended to control for this heterogeneity and conclude that minimum wages in the United States have not reduced employment. The authors explore the ability of the new research designs to isolate reliable identifying information, and they test the designs' untested assumptions about the construction of better control groups. Their analysis reveals problems with the new research designs. Moreover, using methods that let the data identify the appropriate control groups, their results reaffirm the evidence of disemployment effects, with teen employment elasticities near -0.15. This evidence, they conclude, still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others.

Original languageEnglish (US)
Pages (from-to)608-648
Number of pages41
JournalILR Review
Volume67
Issue numberSUPPL
DOIs
StatePublished - 2014
Externally publishedYes

Keywords

  • Minimum wage effect
  • Spatial heterogeneity

ASJC Scopus subject areas

  • Strategy and Management
  • Organizational Behavior and Human Resource Management
  • Management of Technology and Innovation

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