Are the Effects of Minimum Wage Increases Always Small? New Evidence from a Case Study of New York State

Joseph J. Sabia, Richard Burkhauser and Benjamin Hansen

ILR Review, 2012, vol. 65, issue 2, 350-376

Abstract: The authors estimate the effect of the 2004–6 New York State (NYS) minimum wage increase from $5.15 to $6.75 per hour on the employment rates of 16- to 29-year-olds who do not have a high school diploma. Using data drawn from the 2004 and 2006 Current Population Survey, they employ difference-in-difference estimates to show that the NYS minimum wage increase is associated with a 20.2% to 21.8% reduction in the employment of less-skilled, less-educated workers, with the largest effects on those aged 16 to 24. Their estimates imply a median employment elasticity with respect to the minimum wage of around −0.7, large relative to previous researchers' estimates. The authors' findings are robust to their choice of geographically proximate comparison states, the use of a more highly skilled within-state comparison group, and a synthetic control design approach. Moreover, their results provide plausible evidence that state minimum wage increases can have substantial adverse labor demand effects for low-skilled individuals that are outside previous elasticity estimates, ranging from −0.1 to −0.3.

Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ilrrev:v:65:y:2012:i:2:p:350-376

DOI: 10.1177/001979391206500207

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