Title: The Short-Run Effects of the Minimum Wage on Employment and Labor Market Participation: Evidence from an Individual-Level Panel
Abstract: Neumark, Salas, and Wascher (2014) succinctly summarize empirical challenges researchers of minimum wage face: the identification of minimum wage effects requires both a sufficiently sharp focus on potentially affected workers and construction of a valid counterfactual control group for what would have happened absent increases in minimum wage. The difficulty of addressing these two challenges is evident in variety of empirical approaches seen in literature.In this paper, I address latter of issues in a manner nearly absent in minimum wage literature by taking advantage of individual-level longitudinal data to observe 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 individual level that determines unemployment and labor force participation. Specifically, 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 minimum wage are assessed using monthly data, instead of yearly or quarterly data, which allows for 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.
Publication Year: 2019
Publication Date: 2019-05-21
Language: en
Type: article
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