Minimum Wages and Voting: Assessing the Political Returns to Redistribution outside the Tax System

Emiliano Huet-Vaughn ()
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Emiliano Huet-Vaughn: Pomona College

No 16416, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The positive political returns to providing cash transfers have been well documented. However, redistribution through the tax and transfer system, while direct, is not the only means by which governments seek to change the income distribution: regulation of private market transactions may have a similar, if indirect, effect, implicitly redistributing via so-called "pre-distribution" policies. Wage floors, in particular, are implemented with the explicit goal of redistributing pre-tax firm income to low-wage workers. In the United States, polls consistently indicate minimum wage increases are broadly popular, and, also clearly associated with the Democratic party. This paper provides the first test of whether large minimum wage increases actually yield electoral gains for Democrats. For both federal and state races, I find no evidence that this is generally true using an event-study design and sub-national variation in minimum wages from the early 1990s to recent years. A null result is further confirmed when using a beneficiary-level political sentiment measure and difference-in-difference design. Various explanations for the finding are explored and dispelled while newly collected survey evidence supports a salience, or inattention, mechanism. Specifically, voters are found to attend much less to a minimum wage increase than to an equivalently-valued direct cash transfer from the government. This suggests putting money in people's hands may not be enough to receive political credit and that the directness of a transfer may itself matter.

Keywords: salience; minimum wage; voting (search for similar items in EconPapers)
JEL-codes: D72 J8 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2023-08
New Economics Papers: this item is included in nep-cdm, nep-inv, nep-lab and nep-pol
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