The Effect of Minimum Wages Throughout the Wage Distribution

David Neumark, M. Schweitzer and William Wascher

Working Papers from London School of Economics - Centre for Labour Economics

Abstract: This paper provides evidence on a wide set of margins along which labor markets can adjust in response to increases in the minimum wage, including wages, hours, employment, and ultimately labor income, representing the central margins of adjustment that impact the economic well-being of workers potentially affected by minimum wage increases. The evidence indicates that workers initially earning near the minimum wage are adversely affected by minimum wage increases, while, not surprisingly, higher-wage workers are little affected. Although wages of low-wage workers increase, their hours and employment decline, and the combined effect of these changes is a decline in earned income. We also delve into the political economy of minimum wages, attempting to understand the vigorous support of labor unions for minimum wage increases. Using the same empirical framework, we find that relatively low-wage union members gain at the expense of the lowest-wage nonunion workers when minimum wages increase.

Keywords: MINIMUM WAGE; INCOME DISTRIBUTION (search for similar items in EconPapers)
JEL-codes: D31 J31 (search for similar items in EconPapers)
Pages: 29 pages
Date: 1999
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Citations: View citations in EconPapers (1)

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Working Paper: The Effects of Minimum Wages Throughout the Wage Distribution (2000)
Working Paper: The effects of minimum wages throughout the wage distribution (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:lseple:9919

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