Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research

155 Pages Posted: 20 Nov 2006 Last revised: 7 Feb 2021

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

William Wascher

Board of Governors of the Federal Reserve System

Date Written: November 2006

Abstract

We review the burgeoning literature on the employment effects of minimum wages - in the United States and other countries - that was spurred by the new minimum wage research beginning in the early 1990s. Our review indicates that there is a wide range of existing estimates and, accordingly, a lack of consensus about the overall effects on low-wage employment of an increase in the minimum wage. However, the oft-stated assertion that recent research fails to support the traditional view that the minimum wage reduces the employment of low-wage workers is clearly incorrect. A sizable majority of the studies surveyed in this monograph give a relatively consistent (although not always statistically significant) indication of negative employment effects of minimum wages. In addition, among the papers we view as providing the most credible evidence, almost all point to negative employment effects, both for the United States as well as for many other countries. Two other important conclusions emerge from our review. First, we see very few - if any - studies that provide convincing evidence of positive employment effects of minimum wages, especially from those studies that focus on the broader groups (rather than a narrow industry) for which the competitive model predicts disemployment effects. Second, the studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger disemployment effects for these groups.

Suggested Citation

Neumark, David and Wascher, William, Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research (November 2006). NBER Working Paper No. w12663, Available at SSRN: https://ssrn.com/abstract=941970

David Neumark (Contact Author)

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William Wascher

Board of Governors of the Federal Reserve System ( email )

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