Are Minimum Wage Effects Greater in Low‐Wage Areas?

Abstract

Empirical work on the minimum wage typically estimates effects averaged across high‐ and low‐wage areas. Low‐wage labor markets could potentially be less able to absorb minimum wage increases, in turn leading to more negative employment effects. In this article, we examine minimum wage effects in low‐wage counties, where relative minimum wage ratios reach as high as 0.82, well beyond the state‐based ratios in extant studies. Using data from the American Community Survey, the Quarterly Workforce Indicators, and the Quarterly Census on Employment and Wages, we implement event study and difference‐in‐differences methods, estimating average causal effects for all events in our sample and separately for areas with lower and higher impacts. We find positive wage effects, especially in high‐impact counties, but do not detect adverse effects on employment, weekly hours, or annual weeks worked. We do not find negative employment effects among women, Blacks, and/or Hispanics. In high‐impact counties, we find substantial declines in household and child poverty. These results inform policy debates about providing exemptions to a $15 federal minimum wage in low‐wage areas.

Can a federal minimum wage alleviate poverty and income inequality? Ex-post and simulation evidence from Germany

“…Neumark et al (2012) find a slight poverty-reducing effect of city-wide living wage laws. Godøy and Reich (2019) find significant reductions of household and child poverty in lowwage areas across the US.…”

Beyond college for all: Portrait of rapid and successful school-to-work transitions among vulnerable youth.

“…Although the VET system is often criticized for its tendency to reproduce social stratifications (see Protsch & Solga, 2016), there is also evidence showing that countries with strong VET programs generally facilitate a smooth and sustainable early entry to the labor market for work-oriented youth (Quintini & Manfredi, 2009;Schoon & Bynner, 2019). Policies reducing precariousness among lower-wage employees could also contribute to improving the work situations of many young adults (Godøy & Reich, 2019). In particular, better social and financial recognition of jobs typically held by women such as those in care professions (e.g., early childhood education) could help to reduce the gender pay gap and contribute to the creation of greater work opportunities for women seeking rapid job integration (World Economic Forum, 2021).…”

Turnover, Prices, and Reallocation: Why Minimum Wages Raise the Incomes of Low-Wage Workers

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