Working Paper: NBER ID: w21830
Authors: Jeffrey Clemens
Abstract: I analyze recent federal minimum wage increases using the Current Population Survey. The relevant minimum wage increases were differentially binding across states, generating natural comparison groups. I first estimate a standard difference-in-differences model on samples restricted to relatively low-skilled individuals, as described by their ages and education levels. I also employ a triple-difference framework that utilizes continuous variation in the minimum wage's bite across skill groups. In both frameworks, estimates are robust to adopting a range of alternative strategies, including matching on the size of states' housing declines, to account for variation in the Great Recession's severity across states. My baseline estimate is that this period's full set of minimum wage increases reduced employment among individuals ages 16 to 30 with less than a high school education by 5.6 percentage points. This estimate accounts for 43 percent of the sustained, 13 percentage point decline in this skill group's employment rate and a 0.49 percentage point decline in employment across the full population ages 16 to 64.
Keywords: Minimum Wage; Employment; Great Recession
JEL Codes: E24; J21; J31; J38; K31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| minimum wage increases (J38) | reduced employment among individuals ages 16 to 30 with less than a high school education (J79) |
| reduced employment among individuals ages 16 to 30 with less than a high school education (J79) | decline in employment across the broader population aged 16 to 64 (J69) |
| minimum wage increases (J38) | decline in employment among low-skilled individuals in fully bound states compared to partially bound states (F66) |
| minimum wage increases (J38) | significant negative effects on the employment of low-skilled workers (F66) |