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City Limits: What do Local-Area Minimum Wages Do?

Arindrajit Dube and Attila S. Lindner

No 27928, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Cities are increasingly setting their own minimum wages, and this trend has accelerated sharply in recent years. While in 2010 there were only three cities with their own minimum wages exceeding the state or federal standard, by 2020 there were 42. This new phenomenon raises the question: is it desirable to have city-level variation in minimum wage polices? We discuss the main trade-offs emerging from local variation in minimum wage polices and evaluate their empirical relevance. First, we document what type of cities raise minimum wages and we discuss how these characteristics can potentially impact the effectiveness of city-level minimum wage policies. Second, we summarize the evolving evidence on city-level minimum wage changes and provide some new evidence of our own. Early evidence suggests that the impact of the policy on wages and employment to date has been broadly similar to the evidence on state and federal-level minimum wage changes. Overall, city-level minimum wages seem to be able to tailor the policy to local economic environment without imposing substantial distortions in allocation of labor and businesses across locations.

JEL-codes: J01 J18 J2 J23 J3 J31 J38 J8 J88 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-lma and nep-ure
Note: LS
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Published as Arindrajit Dube & Attila Lindner, 2021. "City Limits: What Do Local-Area Minimum Wages Do?," Journal of Economic Perspectives, American Economic Association, vol. 35(1), pages 27-50, Winter.

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