The minimum wage and tipped employees

Using data from theCensus of Retail Trade, I estimate that allowing restaurants to use servers’ tipped income to satisfy minimum wage requirements would create at least 360,000 new high-paying jobs and increase total income for tipped workers by at least 8 percent. Conversely, if the minimum wage were increased 10 percent, tipped workers would experience a 4 percent decrease in employment and a 6 percent reduction in hours worked, and all servers (tipped and non-tipped) would experience a 3 to 5 percent decrease in total income because the tipped jobs lost paid more than the minimum wage. By not allowing employers to use all of a worker’s tipped income to meet the minimum wage, state and federal minimum wage laws inhibit the creation of hundreds of thousands of new jobs paying well above the minimum wage. Total elimination of this credit would decrease employment at least 10 percent.     

Minimum wage effects by gender

Recent criticisms have led some to dismiss time-series analyses in the debate over the minimum wage. We investigate previous time-series studies showing that raising the minimum wage has a smaller impact on females than males. We reanalyze the data in light of recent developments in time-series methods and find that the minimum wage has a similar significant negative impact on both males and females. We conclude that, following a 10 percent increase in the minimum wage, both male and female employment drops from between 2 and 4 percent over a two-year period. This employment decrease slowly erodes as economic growth and inflation cause the minimum wage to fall below the market-clearing wage. We thank David Card and Alan Krueger for generously providing the data.     

A Reexamination of Card and Krueger's State-Level Study of the Minimum Wage

Card and Krueger's (1995) difference-in-difference study of the 1990-1991 federal minimum wage hikes compared states by the proportion of workers directly affected by the minimum wage. They found "no evidence that the increase in the minimum wage significantly lowered teenage employment rates more in highly affected states" and they concluded the minimum wage did not reduce employment. Their paper was highly influential and convinced many that the minimum wage did not reduce employment. However, when I apply their model to the 1996-1997 federal minimum wage hike, I find that increases in the minimum wage significantly lowered teenage employment rates more in highly affected states. Using Card and Krueger's interpretation, this implies the minimum wage did reduce teenage employment.     

Spillover Bias in Cross-Border Minimum Wage Studies: Evidence from a Gravity Model

This paper explores the problem of spillover bias in cross-border studies of the minimum wage using a commuter gravity model on county-level data from 2009 to 2013. Commuter flows conform to the expectations of the gravity equation, but flows across county borders are sensitive to changes in the minimum wage rate, which implies that minimum wage employment effect estimates using contiguous counties are likely to suffer from spillover bias. One way to address this bias is to include a control ring between treatment and comparison counties, although this solution may introduce biases of its own. A gravity model that includes a control ring affirms that this alternative comparison group can address this spillover bias problem.     

State minimum wage laws: Youth coverage and impact

Federal minimum wage statutes cover only 70 percent of the work force and 30 percent of all employers. State laws are designed to close some of these coverage gaps and in some cases to set higher wage floors. Hence, differences in state wage floors and coverage should affect employment rates and wage distributions, particularly among low-skilled workers. Evidence from the National Longitudinal Ssurveys of Youth is mixed, however: State wage floors appear to have no impact on youth employment or entry wages, but coverage exemptions appear to increase both employment and wages. These observations underscore the need to include state provisions in models of minimum wage impacts, particularly for later periods (e.g., 1988–1991) when state wage floors were relatively higher.     

The Effect of the Minimum Wage on Covered Teenage Employment

Unlike previous studies on the minimum wage, which focused on its effect on total teenage employment, we examine its effect on covered employment. A covered job was defined to be one paying the minimum wage or more. Using contemporary wages to classify workers this way may inflate the estimated effect of minimum wages on covered employment. To avoid this bias, covered jobs are identified using a logit procedure run over years in which the minimum age was not increased. We find that minimum wages reduced covered employment significantly more than total employment. We also show that covered employment may be overstated in the period following an increase in the minimum wage.     

The Effects of Minimum Wages over the Business Cycle

This study examines whether the low-skilled employment effects of minimum wage increases differ over the state business cycle. Controlling for spatial heterogeneity via state-specific productivity shocks to the low-skilled sector and state-specific non-linear time trends, the results suggest that minimum wage increases between 1989 and 2012 reduce low-skilled employment more during recessions than expansions. Estimated employment elasticities with respect to the minimum wage range from 0 to ?0.2 during state economic expansions, but reach as high as ?0.3 during troughs in the business cycle.     

MINIMUM WAGE EFFECTS WITH OUTPUT STABILIZATION

What are the effects of legal minimum wage rates on the U.S. economy? Does minimum wage legislation promote the economic self-interest of high wage union labor and impede the economic self-interest of capitalists as our earlier research [Cox and Oaxaca 1982] suggested? This paper uses a nine sector econometric/simulation model of U.S. industry from 1975–1978 to answer these questions in the context of stabilization policies which hold aggregate real output constant. While most simulated percentage effects are small, those for the unskilled workers themselves are not. A 15.7 percent increase in the average nominal wage rate of unskilled labor, as a result of minimum wage legislation, produced an 11 percent decrease in unskilled employment, 2.2 million jobs lost, while increasing the real wage of unskilled workers by 15 percent. Simulated changes in several key variables support our earlier observations that the self-interests of labor unions, with skilled workers, conflict with those of capitalists over the issue of minimum wage legislation.     

Employment-based retirement plan participation: geographic differences and trends, 2010

LATEST DATA: This Issue Brief examines the level of participation by workers in public- and private-sector employment-based pension or retirement plans, based on the U.S. Census Bureau's March 2011 Current Population Survey (CPS), the most recent data currently available (for year-end 2010). SPONSORSHIP RATE: Among all working-age (21-64) wage and salary employees, 54.2 percent worked for an employer or union that sponsored a retirement plan in 2010. Among full-time, full-year wage and salary workers ages 21-64 (those with the strongest connection to the work force), 61.6 percent worked for an employer or union that sponsors a plan. PARTICIPATION LEVEL: Among full-time, full-year wage and salary workers ages 21-64, 54.5 percent participated in a retirement plan. TREND: This is virtually unchanged from 54.4 percent in 2009. Participation trends increased significantly in the late 1990s, and decreased in 2001 and 2002. In 2003 and 2004, the participation trend flattened out. The retirement plan participation level subsequently declined in 2005 and 2006, before a significant increase in 2007. Slight declines occurred in 2008 and 2009, followed by a flattening out of the trend in 2010. AGE: Participation increased with age (61.4 percent for wage and salary workers ages 55-64, compared with 29.2 percent for those ages 21-24). GENDER: Among wage and salary workers ages 21-64, men had a higher participation level than women, but among full-time, full-year workers, women had a higher percentage participating than men (55.5 percent for women, compared with 53.8 percent for men). Female workers' lower probability of participation among wage and salary workers results from their overall lower earnings and lower rates of full-time work in comparison with males. RACE: Hispanic wage and salary workers were significantly less likely than both white and black workers to participate in a retirement plan. The gap between the percentages of black and white plan participants that exists overall narrows when compared across earnings levels. GEOGRAPHIC DIFFERENCES: Wage and salary workers in the South and West had the lowest participation levels (Florida had the lowest percentage, at 43.7 percent) while the upper Midwest, Mid-Atlantic, and Northeast had the highest levels (West Virginia had the highest participation level, at 64.2 percent). OTHER FACTORS: White, more highly educated, higher-income, and married workers are more likely to participate than their counterparts.     

Does the minimum wage drive teenagers out of the labor force?

Labor force participation is directly related to the value of being in the labor force. The effect of the minimum wage on labor force participation thus measures how the minimum wage affects the welfare of labor force participants. In contrast, a decline in employment tells us little about welfare, because of the offsetting wage increase. Only changes in labor force participation can directly measure the welfare effects of the minimum wage. Despite this, most literature about the minimum wage has been focused on employment. My empirical results show that the minimum wage has a significant negative effect on teenage labor force participation. Thus, a minimum wage reduces the value of entering the labor market.     

Do minimum wage hikes reduce employment? State-level evidence from the low-wage retail sector

Several recent studies have challenged the conventional notion that raising the minimum wage reduces employment. This study considers this issue by examining the minimum wage's influence on retail employment. Standard labor market analysis suggests that low-wage industries should be particularly sensitive to minimum wage hikes. Therefore, by considering retail employment using pooled-cross sectional, state-level data, this study extends recent research that generally emphasized teen employment. The empirical analysis considers state data from the latter 1980's, a unique period where many states raised their minimum wage above the federal level. Our results suggest that an increased minimum wage reduces retail employment, which is consistent with the standard labor market model. Moreover, further analysis indicates that minimum wage hikes also had relatively large adverse effects on total state employment growth, which implies that state minimum-wage policies can affect firm and household location. We thank Dan Rickman and the anonymous referee for their help with this study.     

MINIMUM WAGES AND TIPPED SERVERS

Tips allow restaurants to pay servers lower wages. As more servers are hired, each serves fewer meals and earns less in tips. As a result, restaurants must pay a higher wage. This gives them monopsony power over wages. Over some range, a higher minimum wage should increase employment. Empirically, we found the full "reverse C" monopsony pattern of employment for restaurants, with employment first going up and then down as the minimum wage is increased.     

THE EFFECT OF MINIMUM WAGES ON EMPLOYMENT: A FACTOR MODEL APPROACH

This paper uses factor model methods to resolve issues in the minimum wage‐employment debate. Factor model methods provide a more flexible way of addressing concerns related to unobserved heterogeneity that are robust to critiques from either side of the debate. The factor model estimators produce minimum wage‐employment elasticity estimates that are much smaller than the traditional ordinary least squares (OLS) results and are not statistically different from zero. These results hold for many specifications and datasets from the minimum wage‐employment literature. A simulation shows that unobserved common factors can explain the different estimates seen across methodologies in the literature. (JEL C23, J21, K31)     

Recent minimum wage increases and the minimum wage labor force

Coclusion  Recently Whaples (1996) reported that most labor economists believe that minimum wage laws decrease employment. Despite this, policy makers have continued to periodically raise the minimum, with the most recent increases occurring in October 1996 and September 1997. The various analyses done by Card, Katz, and Krueger, that showed little to no employment effect of past minimum wage increases, have provided additional ammunition for those who would seek further increases. However, using the estimates of Williams and Mills (1998), we demonstrate that the latest minimum wage increases substantially decreased employment for both sexes. We believe that future increases will do likewise.     

家庭社会资本对大学生农村就业意愿的影响

家庭是影响大学生农村就业的一个重要因素,因而家庭社会资本与大学生农村就业行为有密切的关系。家庭社会资本对大学生去农村的就业意愿、最低工资价位和职业选择的影响显著。母亲的受教育程度、家庭年收入越高,大学生去农村的就业意愿越高,大学生去农村的最低心理工资价位越高;父母的受教育程度越高,大学生去农村更愿意选择从政。     

EMPLOYMENT EFFECTS OF TWO NORTHWEST MINIMUM WAGE INITIATIVES

This article exploits a natural experiment initiated by Oregon and Washington voter referendums to show that the minimum wage is a blunt instrument that differentially affects low-wage workers within and across industries. Specifically, employment growth specifications indicate that the minimum wage generates consistently negative employment effects for eating and drinking workers where the minimum is shown to be relatively binding, but not for hotel and lodging workers where the minimum is less binding. Regressions using job-specific want-ad data from Portland and Seattle newspapers also indicate a reduction in hiring solicitation relating to the extent that the minimum wage binds. ( JEL J31, J38)     

Can a minimum wage increase have an adverse impact on inequality? Evidence from two Latin American economies

This paper uses a semiparametric model to analyze the impact of an increase in the real minimum wage on inequality in Colombia between 1995 and 1999 and in Paraguay between 1993 and 2000–2001. Simulations suggest that if the employment effects of the minimum wage increase are ignored, the underlying policies would contribute to reduce earnings inequality in Colombia and would be inequality neutral in Paraguay. By considering the drop in wages of those who lost their jobs, simulations suggest that in both countries the policy in question would increase earnings inequality under some assumptions about the employment elasticity of the minimum wage and the new level of earnings unemployed workers rely upon. While these findings do not mean that minimum wage increases in LDCs (Less Developed Countries) necessarily have adverse distributional affects, they suggest that minimum wage policy should be implemented with care depending on how sensitive employment is to wage increases. An erratum to this article can be found at     

Economic growth and inequality in Singapore: The case for a minimum wage

In the context of Singapore's ageing population, the employment of large numbers of low‐skilled foreign workers is proving to be a major challenge to inclusive growth because of the stagnation of low‐wage workers' incomes. In order to address this problem, the author makes the case for introducing a minimum wage to complement existing in‐work benefit schemes. After addressing the commonly voiced objections to a minimum wage system, he suggests ways in which a minimum wage could be implemented in Singapore. New measures to enhance the social safety net and foster more sustainable economic growth are also proposed.     

The Impact of Minimum-Wage Increases: Evidence from Fast-food Establishments in Illinois and Indiana

Fast-food establishments in Illinois and Indiana were surveyed during a period of state-mandated minimum-wage increases in Illinois. While entry-level wages of Illinois establishments rose substantially in response to the mandated increases, there is little evidence that Illinois establishments ameliorated wage increases by delaying scheduled raises or reducing fringe benefit offerings. There is little evidence of ‘labor-labor’ substitution in favor of women, better educated, or teenaged workers, or increased worker tenure at the new wage, but weak evidence of increased food prices. In contrast, there are large declines in part-time positions and workers’ hours in Illinois relative to Indiana. Aggregate figures from the Bureau of Labor Statistics support relative declines in total fast-food employment in ‘downstate’ Illinois counties, as hypothesized. However, establishments’ responses do not appear proportionate to the strength of the minimum wage change.