Estimating the employment effect of the minimum wage through variation in compliance: evidence from five US states

Gmeiner, Michael ORCID: 0000-0002-9604-4061 and Gmeiner, Robert (2023) Estimating the employment effect of the minimum wage through variation in compliance: evidence from five US states. Journal of Government and Economics, 12. ISSN 2667-3193

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Abstract

The implications of a binding minimum wage law on employment have been the subject of a lively and ongoing debate. Estimation of employment effects may be hindered by the non-random manner in which minimum wage laws are created. To overcome this, we explore the employment implications of the minimum wage in the US restaurant industry through an approach that exploits variation in compliance, as opposed to legislation. In the five US states without state minimum wages, violations of the US federal minimum wage are shown to be associated with decreased employment in the restaurant industry in the time period around the federal minimum wage increases of 2007 through 2009. The most robust specification shows an elasticity of employment with respect to unpaid wages of -0.233. Robustness checks use earlier time periods to show results do not reflect seasonal trends, vary the group of industries used as controls, and only use 2007 to show estimates are not confounded by a unique effect of the Great Recession on the restaurant industry.

Item Type:	Article
Official URL:	https://www.sciencedirect.com/journal/journal-of-g...
Additional Information:	© 2023 The Author(s)
Divisions:	Economics
Subjects:	H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HB Economic Theory
JEL classification:	J - Labor and Demographic Economics > J0 - General > J08 - Labor Economics Policies J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J38 - Public Policy J - Labor and Demographic Economics > J4 - Particular Labor Markets > J42 - Monopsony; Segmented Labor Markets
Date Deposited:	11 Jan 2024 10:15
Last Modified:	01 Apr 2024 08:40
URI:	http://eprints.lse.ac.uk/id/eprint/121277

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