Revisiting the Minimum Wage-Employment Debate: Throwing Out the Baby with the Bathwater?

David Neumark, John Michael Ian Salas and William Wascher

No 7166, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We revisit the minimum wage-employment debate, which is as old as the Department of Labor. In particular, we assess new studies claiming that the standard panel data approach used in much of the "new minimum wage research" is flawed because it fails to account for spatial heterogeneity. These new studies use research designs intended to control for this heterogeneity and conclude that minimum wages in the United States have not reduced employment. We explore the ability of these research designs to isolate reliable identifying information and test the untested assumptions in this new research about the construction of better control groups. Our evidence points to serious problems with these research designs. We conclude that the evidence still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others, and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage.

Keywords: control groups; employment; minimum wage (search for similar items in EconPapers)
JEL-codes: J23 J38 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2013-01
New Economics Papers: this item is included in nep-ltv
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Citations: View citations in EconPapers (94)

Published - published in: ILR Review, 2014, 67 (S3), 608-648.

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