AMHERST, Mass. – Economists at the University of Massachusetts Amherst along with colleagues from University College London and the Economic Policy Institute have found that the overall number of low-wage jobs remained essentially unchanged over the five years following increases to the minimum wage, and that affected low-wage workers overall saw a wage gain of 7 percent after a minimum wage increase. These spillovers extended up to $3 above the minimum wage and represent around 40 percent of the overall wage increase from minimum wage changes.
The authors also found that within the scope of minimum wages they studied – which range between 37-59 percent of the median wage – there was no evidence of job losses even at the higher end of this scale. These findings, the researchers say, suggest minimum wages are mostly having the intended effect of raising bottom wages with little adverse, unintended consequences on jobs.
The research into the impacts of 138 prominent state-level minimum wage changes in the U.S. between 1979 and 2016 was conducted by Arindrajit Dube, professor of economics at UMass Amherst, Doruk Cengiz, a doctoral student in economics at UMass Amherst, Attila Lindner of University College London and Ben Zipperer of the Economic Policy Institute. Their report, “The Effect of Minimum Wages on Low-Wage Jobs,” was published in the August edition of the Quarterly Journal of Economics, the highest ranked peer-reviewed publication in the field.
“Our study provides a comprehensive analysis of how minimum wages affect overall low-wage employment – the first paper on this topic in the QJE since the advent of ‘new minimum wage research’ in the early 1990s.” Dube says. “The approach we develop here will be very useful to track the effect on jobs and wages as policymakers explore more ambitious minimum wage policies at the state and federal level.
“These findings are relevant,” Dube concludes, “as many states currently are experimenting with more ambitious minimum wage policies, and as the House of Representatives recently passed legislation to substantially increase the federal minimum wage.”
The study is the most comprehensive to date and develops a new method of precisely estimating the impact of minimum wages on the number of low wage jobs and changes in wages at the bottom of the labor market. The authors assessed the overall employment effect of the minimum wage by tracking the changes in the number of jobs by wage levels relative to the minimum wage following a policy change, and compared those to states that did not raise the minimum wage around the same time.
The new paper is the first one on the topic of the employment effect of minimum wages to be published in any of the top 5 economic journals since 2000, highlighting the prominence of its findings.
David Autor, Ford Professor of Economics at Massachusetts Institute of Technology and one of the leading economists in the country, called the study “the most important work on minimum wage effects since [David] Card and [Alan] Krueger’s work” in the 1990s, according to a recent article in The Washington Post. Autor is quoted in the article saying the study “should win over some skeptics and ‘shift the weight of consensus’ about the effect of minimum wages on jobs.”
The complete report, “Effect of minimum wages on low wage jobs,” can be found online at https://academic.oup.com/qje/article/134/3/1405/5484905