Can Rescheduling Explain the New Jersey Minimum Wage Studies?

The ambiguous effect of minimum wages on hours

“…Hamermesh (1993) develops a model that deals with the firm's choice of workers and hours in a cost minimisation framework (similar to that illustrated in Figure 2 below) which includes a brief discussion of minimum wages, while Michl (2000) outlines a model where firms with a Cobb-Douglas production function over hours and workers choose workers and hours to minimise cost, assuming that the wage does not increase with hours. Other studies, such as Stewart and Swaffield (2006), Zavodney (2000), Neumark and Schweitzer (2000), and Connolly and Gregory (2002) contain some general discussions on how mimimum wages are related to hours but do not build a formal theoretical model.…”

“…For example, Hamermesh (1993) assumes the equilibrium locus has a positive slope in his treatment of the theory of hours per workers, while Michl (2000) supposes the locus is flat. Interestingly, in a monopsony model where the supply of workers to the firm depends on the utility of the hours wage combination offered by the firm, a fall in hours in response to a minimum wage does not imply a downward sloping hours wage locus [see Strobl and Walsh (2007) for example] 12 .…”

“…This implies that if some of the combinations of assumptions often made in this literature hold, then total hours will increase. As noted earlier, it is common to assume that the wage hours locus has a positive slope, while Feldstein (1967) and Michl (2000) amongst others explicitly assume qn qh ε ε > . We do not wish to argue based on Proposition 2 that one should typically expect total hours to increase.…”

Minimum Wage Effects in the Longer Run

“…Our interest in this paper, though, is in the overall benefits or costs to workers of minimum wages, so the unconditional estimates are the most pertinent. Some evidence on the effects of minimum wages on hours of work is reported in Gramlich (1976), Brown, et al (1983, Cunningham (1981), andMichl (2000). indicating that state minimum wages tend to be implemented in higher wage states.…”

Effects of Minimum Wages on Youth Employment: the Importance of Accounting for Spatial Correlation

“…Card and Krueger (2000) responded with an analysis using administrative data that confirmed their original result, that the New Jersey minimum wage increase probably had no effect on employment in New Jersey's fast food industry but possibly had a small positive effect. Michl (2000) reconciled these apparently contradictory results by attributing them to "rescheduling" by employers. Employers did not reduce the number of workers in response to a minimum wage increase.…”