Here is a summary of post-2018 minimum wage conclusions that my students learn about:
1. The extensive margin impact (unemployment/employment) of minimum wages is disputed. While some argue that the effect is predominantly negative (minimum wage increases lead to unemployment), this is not conclusive.
2. Much of the negative impacts of minimum wages on employment are from 3 groups: (1) young adults; (2) teens; and (3) very low educated adults.
3. There are actually empirical and theoretical examples of the elasticity of minimum wage on unemployment being positive; this means that minimum wage increases INCREASE employment. This would largely stem from markets where there is high market concentration (employers have disproportionate market power), where there are nonwage margins to alter
4. The minimum wage’s largest impacts are on the intensive margin (hours worked). These are, pretty much uniformly, negative (so, minimum wage hikes decrease hours worked). Some findings, however, argue that WEEKLY earnings increase, offsetting the loss in hours worked by the higher wage.
5. Minimum wages reduce labor market turnover (efficiency wage), reduce hiring, and reduce termination. There is some evidence that those that “survive” the minimum wage (either not getting fired or sticking with the firm) see a restoration of hours later on.
6. There is some evidence that non-wage benefits (health insurance, training, reduced-price meals at work, …) fall following minimum wage increases.
7. There is some evidence that output prices increase following minimum wage increases. In fast food, the price pass through is substantial, as is grocery store price through.
8. While real wages for minimum wage workers USUALLY increases, real incomes fall for low (non-minimum wage) workers and the highest incomes.
Moobygriller on
The states that are raising minimum wages are:
Arizona, California, Colorado, Connecticut, Hawaii, Maine, Michigan, Minnesota, Missouri, Montana, Nebraska, New Jersey, New York, Ohio, Rhode Island, South Dakota, Vermont, Virginia, and Washington.
Washington has the highest at $17.13, NY will be $17
Increases will kick in on January 1st
EconomistWithaD on
Beyond the immediate labor market impacts, 2 other studies bear mentioning. The first is from one of the 4 godfathers of minimum wage research.
Neumark, D (2024). The Effects of Minimum Wages on (Almost) Everything? A Review of Recent Evidence on Health and Related Behaviors
The Neumark (2024) paper summarizes the literature. The major findings are:
· The evidence of minimum wage increases on overall physical health is mixed.
o There are either no changes in diet quality or obesity rates, or they improve.
o Higher minimum wages increase smoking rates and reduce exercise rates.
· More studies find no impact of higher minimum wages on mental health, though some studies find that minimum wages increase mental health.
o The evidence for suicide is unambiguous; higher minimum wages reduce suicide rates.
· Higher minimum wages allow mothers to spend more time with their children, while there is no change in the treatment of children. However, there are declines in children’s test scores.
o The decline in math and reading test scores likely related to more work time by parents, with less time for educational activities.
· Minimum wage increases increase risky behavior (drinking and smoking).
· Minimum wage increases tend to increase property crimes only, with no change in violent crimes.
· Minimum wage increases lead to reductions in employer-sponsored health insurance; they can either increase or decrease Medicaid enrollment (and therefore lead to no change in total health insurance coverage), but the negative impacts are mitigated by post-ACA Medicaid expansion.
The above looks at minimum wage for small/medium sized businesses. It appears that the disemployment effects are concentrated amongst larger businesses, but that new firm entry is forestalled by the minimum wage. I
Jdelu on
A lot of these places minimum wage is irrelevant. Where I am in Vermont, minimum wage is 14.01 and going up to 14.42 but the market rate for low or no skill entry level labor is at a minimum 16 per hour, most retail/food service is paying at least 18. Walmart pays $17. Maybe this means our labor market is relatively healthy, or maybe the minimum is just too low, I’m not sure.
4 Comments
Here is a summary of post-2018 minimum wage conclusions that my students learn about:
1. The extensive margin impact (unemployment/employment) of minimum wages is disputed. While some argue that the effect is predominantly negative (minimum wage increases lead to unemployment), this is not conclusive.
2. Much of the negative impacts of minimum wages on employment are from 3 groups: (1) young adults; (2) teens; and (3) very low educated adults.
3. There are actually empirical and theoretical examples of the elasticity of minimum wage on unemployment being positive; this means that minimum wage increases INCREASE employment. This would largely stem from markets where there is high market concentration (employers have disproportionate market power), where there are nonwage margins to alter
4. The minimum wage’s largest impacts are on the intensive margin (hours worked). These are, pretty much uniformly, negative (so, minimum wage hikes decrease hours worked). Some findings, however, argue that WEEKLY earnings increase, offsetting the loss in hours worked by the higher wage.
5. Minimum wages reduce labor market turnover (efficiency wage), reduce hiring, and reduce termination. There is some evidence that those that “survive” the minimum wage (either not getting fired or sticking with the firm) see a restoration of hours later on.
6. There is some evidence that non-wage benefits (health insurance, training, reduced-price meals at work, …) fall following minimum wage increases.
7. There is some evidence that output prices increase following minimum wage increases. In fast food, the price pass through is substantial, as is grocery store price through.
8. While real wages for minimum wage workers USUALLY increases, real incomes fall for low (non-minimum wage) workers and the highest incomes.
The states that are raising minimum wages are:
Arizona, California, Colorado, Connecticut, Hawaii, Maine, Michigan, Minnesota, Missouri, Montana, Nebraska, New Jersey, New York, Ohio, Rhode Island, South Dakota, Vermont, Virginia, and Washington.
Washington has the highest at $17.13, NY will be $17
Increases will kick in on January 1st
Beyond the immediate labor market impacts, 2 other studies bear mentioning. The first is from one of the 4 godfathers of minimum wage research.
Neumark, D (2024). The Effects of Minimum Wages on (Almost) Everything? A Review of Recent Evidence on Health and Related Behaviors
The Neumark (2024) paper summarizes the literature. The major findings are:
· The evidence of minimum wage increases on overall physical health is mixed.
o There are either no changes in diet quality or obesity rates, or they improve.
o Higher minimum wages increase smoking rates and reduce exercise rates.
· More studies find no impact of higher minimum wages on mental health, though some studies find that minimum wages increase mental health.
o The evidence for suicide is unambiguous; higher minimum wages reduce suicide rates.
· Higher minimum wages allow mothers to spend more time with their children, while there is no change in the treatment of children. However, there are declines in children’s test scores.
o The decline in math and reading test scores likely related to more work time by parents, with less time for educational activities.
· Minimum wage increases increase risky behavior (drinking and smoking).
· Minimum wage increases tend to increase property crimes only, with no change in violent crimes.
· Minimum wage increases lead to reductions in employer-sponsored health insurance; they can either increase or decrease Medicaid enrollment (and therefore lead to no change in total health insurance coverage), but the negative impacts are mitigated by post-ACA Medicaid expansion.
The second is a newer paper. [https://academic.oup.com/qje/advance-article/doi/10.1093/qje/qjaf053/8376639?login=false](https://academic.oup.com/qje/advance-article/doi/10.1093/qje/qjaf053/8376639?login=false)
The above looks at minimum wage for small/medium sized businesses. It appears that the disemployment effects are concentrated amongst larger businesses, but that new firm entry is forestalled by the minimum wage. I
A lot of these places minimum wage is irrelevant. Where I am in Vermont, minimum wage is 14.01 and going up to 14.42 but the market rate for low or no skill entry level labor is at a minimum 16 per hour, most retail/food service is paying at least 18. Walmart pays $17. Maybe this means our labor market is relatively healthy, or maybe the minimum is just too low, I’m not sure.