More on Recent Evidence on the Effects of Minimum Wages in the United States

37 Pages Posted: 27 Oct 2014

See all articles by David Neumark

David Neumark

University of California, Irvine - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

John Michael Ian S Salas

Harvard University - Center for Population and Development Studies

William Wascher

Board of Governors of the Federal Reserve System

Date Written: October 2014

Abstract

A central issue in estimating the employment effects of minimum wages is the appropriate comparison group for states (or other regions) that adopt or increase the minimum wage. In recent research, Dube et al. (2010) and Allegretto et al. (2011) argue that past U.S. research is flawed because it does not restrict comparison areas to those that are geographically proximate and fails to control for changes in low-skill labor markets that are correlated with minimum wage increases. They argue that using "local controls" establishes that higher minimum wages do not reduce employment of less-skilled workers. In Neumark et al. (2014), we present evidence that their methods fail to isolate more reliable identifying information and lead to incorrect conclusions. Moreover, for subsets of treatment groups where the identifying variation they use is supported by the data, the evidence is consistent with past findings of disemployment effects. Allegretto et al. (2013) have challenged our conclusions, continuing the debate regarding some key issues regarding choosing comparison groups for estimating minimum wage effects. We explain these issues and evaluate the evidence. In general, we find little basis for their analyses and conclusions, and argue that the best evidence still points to job loss from minimum wages for very low-skilled workers - in particular, for teens.

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Suggested Citation

Neumark, David and Salas, John Michael Ian S and Wascher, William, More on Recent Evidence on the Effects of Minimum Wages in the United States (October 2014). NBER Working Paper No. w20619, Available at SSRN: https://ssrn.com/abstract=2515197

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John Michael Ian S Salas

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William Wascher

Board of Governors of the Federal Reserve System ( email )

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