Much of the debate relates to methods of identifying the effects of minimum wages on employment. Case study methods (like those employed by David Card and the late Alan Krueger in their famous 1994 paper) tend to find that minimum wages have no effect, while panel studies (involving many minimum wage changes across many jurisdictions) tend to find negative effects of minimum wages on employment.
One of the latest studies using the panel method is described in this 2017 article by Kate Rybczynski and Anindya Sen (both University of Waterloo), published in the journal Contemporary Economic Policy (sorry, I don't see an ungated version online). Rybczynski and Sen use data from Canadian provinces that includes "185 minimum wage amendments enacted by 10 provinces over a 31-year time frame" (1981-2011), and look at how the real (adjusted for inflation) minimum wage affected the employment rate (the proportion of all people employed) in each province. They find that:
...amendments to the minimum wage result in lower employment rates for male and female teens, with an absence of statistically significant gender differences. Specifically, our estimates imply that a 10% increase in the minimum wage is significantly correlated with a 1%-4% drop in teen employment rates for both genders.Their results are robust to various alternative specifications, and variations in the data, and they also get similar results using an instrumental variables (IV) analysis. Ordinarily, IV results would be presented as the preferred results. However, I don't find the IV results to be particularly convincing, because the instruments that they use are fairly weak (this has been a problem in most studies of the minimum wage thus far). Neither do Rybczynski and Sen put much stock in their IV results, because they relegate them to a later section and base most of their discussion on the results from the panel data model (as noted in the above quote). Overall, the results support a disemployment effect of the minimum wage.
Rybczynski and Sen also find that the minimum wage has no effect on prime-aged adults (to be expected as most prime-aged adults earn much more than the minimum wage), but the minimum wage does reduce employment among prime-aged immigrants (who tend to have less human and social capital, so might be expected to earn closer to the minimum wage).
Add this paper to the weight of evidence that the minimum wage reduces employment among vulnerable (young and immigrant) workers.
Read more:
- Jeffrey Clemens on the disemployment effects of the minimum wage
- The impact of an online minimum wage
- Seattle's minimum wage, revisited
- The latest evidence supports negative employment effects of the minimum wage
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