The Effect of Minimum Wages on Wages and Employment: County-Level Estimates for the United States

John Addison (), McKinley L. Blackburn () and Chad D. Cotti ()
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McKinley L. Blackburn: University of South Carolina
Chad D. Cotti: University of Wisconsin, Oshkosh

No 3300, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We use county-level data on employment and earnings in the restaurant-and-bar sector to evaluate the impact of minimum wage changes on low-wage labor markets. Our empirical approach is similar to the literature that has used state-level panel data to estimate minimum-wage impacts, with the difference that we focus on a particular sector rather than demographic group. Our estimated models are consistent with a simple competitive model of the restaurant-and-bar labor market in which supply-and-demand factors affect both the equilibrium outcome and the probability that a minimum wage will be binding in any given time period. Our evidence does not suggest that minimum wages reduce employment in the overall restaurant-and-bar sector, after controls for trends in sector employment at the county level are incorporated in the model. Employment in this sector appears to exhibit a downward long-term trend in states that have increased their minimum wages relative to states that have not, thereby predisposing fixed-effects estimates towards finding negative employment effects.

Keywords: county-level data; wages and employment; minimum wages; spatial trends (search for similar items in EconPapers)
JEL-codes: J23 J38 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab and nep-ltv
Date: Written 2008-01
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