Working Paper: NBER ID: w23667
Authors: Grace Lordan; David Neumark
Abstract: We study the effect of minimum wage increases on employment in automatable jobs – jobs in which employers may find it easier to substitute machines for people – focusing on low-skilled workers for whom such substitution may be spurred by minimum wage increases. Based on CPS data from 1980-2015, we find that increasing the minimum wage decreases significantly the share of automatable employment held by low-skilled workers, and increases the likelihood that low-skilled workers in automatable jobs become nonemployed or employed in worse jobs. The average effects mask significant heterogeneity by industry and demographic group, including substantive adverse effects for older, low-skilled workers in manufacturing. We also find some evidence that the same changes improve job opportunities for higher-skilled workers. The findings imply that groups often ignored in the minimum wage literature are in fact quite vulnerable to employment changes and job loss because of automation following a minimum wage increase.
Keywords: minimum wage; employment; automatable jobs; low-skilled workers; automation
JEL Codes: J23; J38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Minimum Wage Increase (J38) | Decrease in Share of Automatable Jobs Held by Low-Skilled Workers (F66) |
| Minimum Wage Increase (J38) | Substitution of Machines for Low-Skilled Workers (F66) |
| Minimum Wage Increase (J38) | Increased Job Loss for Low-Skilled Workers (F66) |
| Minimum Wage Increase (J38) | Improved Job Opportunities for Higher-Skilled Workers (J68) |
| Minimum Wage Increase (J38) | Probability of Low-Skilled Individuals Retaining Jobs in Automatable Roles (F66) |
| Minimum Wage Increase (J38) | Likelihood of Transitioning to Nonemployment or Worse Jobs (J62) |