The Minimum Wage and the Great Recession: Evidence of Effects on the Employment and Income Trajectories of Low-Skilled Workers

Jeffrey Clemens and Michael Wither

No 20724, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We estimate the minimum wage's effects on low-skilled workers' employment and income trajectories. Our approach exploits two dimensions of the data we analyze. First, we compare workers in states that were bound by recent increases in the federal minimum wage to workers in states that were not. Second, we use 12 months of baseline data to divide low-skilled workers into a "target" group, whose baseline wage rates were directly affected, and a "within-state control" group with slightly higher baseline wage rates. Over three subsequent years, we find that binding minimum wage increases had significant, negative effects on the employment and income growth of targeted workers. Lost income reflects contributions from employment declines, increased probabilities of working without pay (i.e., an "internship" effect), and lost wage growth associated with reductions in experience accumulation. Methodologically, we show that our approach identifies targeted workers more precisely than the demographic and industrial proxies used regularly in the literature. Additionally, because we identify targeted workers on a population-wide basis, our approach is relatively well suited for extrapolating to estimates of the minimum wage's effects on aggregate employment. Over the late 2000s, the average effective minimum wage rose by 30 percent across the United States. We estimate that these minimum wage increases reduced the national employment-to-population ratio by 0.7 percentage point.

JEL-codes: I38 J08 J21 J38 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-lab and nep-lma
Note: LS PE
References: Add references at CitEc
Citations: View citations in EconPapers (79)

Published as Jeffrey Clemens & Michael Wither, 2019. "The minimum wage and the Great Recession: Evidence of effects on the employment and income trajectories of low-skilled workers," Journal of Public Economics, .

Downloads: (external link)
http://www.nber.org/papers/w20724.pdf (application/pdf)

Related works:
Journal Article: The minimum wage and the Great Recession: Evidence of effects on the employment and income trajectories of low-skilled workers (2019)
Working Paper: The Minimum Wage and the Great Recession: Evidence of Effects on the Employment and Income Trajectories of Low-Skilled Workers (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:20724

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w20724

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().