published in: Applied Economics, 2022, 54 (35), 4043 - 4059
Neumark, Salas, and Wascher (2014) succinctly summarize the empirical challenges researchers of the minimum wage face: "the identification of minimum wage effects requires both a sufficiently sharp focus on potentially affected workers and the construction of a valid counterfactual control group for what would have happened absent increases in the minimum wage." The difficulty of addressing these two challenges is evident in the variety of empirical approaches seen in the literature.
In this paper, I address the latter of the issues in a manner nearly absent in the minimum wage literature by taking advantage of individual-level longitudinal data to observe the impacts of minimum wage changes on unemployment and labor force participation. Using within-individual variation and short 4-month panels, I control for heterogeneity at the individual level that determines unemployment and labor force participation. Specifically, the empirical strategy controls any fixed individual-specific idiosyncrasies and differential exposure to time-invariant economic shocks.
This differs significantly from previous literature that exploits within-state variation. The short-run impacts of the minimum wage are assessed using monthly data, instead of yearly or quarterly data, which allows for the analysis of contemporaneous minimum wage effects. There is no evidence of an increase in unemployment immediately following a minimum wage increase. In addition, it does not appear that employers are substituting full-time workers with part-time workers. That said, there is robust evidence that immediately following a minimum wage increase, labor force participation decreases.
We use cookies to provide you with an optimal website experience. This includes cookies that are necessary for the operation of the site as well as cookies that are only used for anonymous statistical purposes, for comfort settings or to display personalized content. You can decide for yourself which categories you want to allow. Please note that based on your settings, you may not be able to use all of the site's functions.
Cookie settings
These necessary cookies are required to activate the core functionality of the website. An opt-out from these technologies is not available.
In order to further improve our offer and our website, we collect anonymous data for statistics and analyses. With the help of these cookies we can, for example, determine the number of visitors and the effect of certain pages on our website and optimize our content.