This week, I'm going to write several posts about the minimum wage, as I've recently read a bunch of research related to it. It's a topic I've written on many times before (see the links at the end of this post). It's also a research topic where the evidence is far from settled. At least in terms of the employment effects, there is still active debate, although I conclude (as does Jeffrey Clemens) that the totality of the evidence points towards a reduction in employment for those most directly affected.
However, reducing the number of jobs is not the only way that employers may respond to a higher minimum wage. This 2021 article by Clemens outlines a number of margins where employers may change behaviour in response to a higher minimum wage. I'll write about that Clemens article tomorrow, because today I want to focus in on one particular margin where employers may adjust - workplace safety.
How might a change in the minimum wage affect workplace safety? As this new paper by Michael Davies (MIT), Jisung Park (University of Pennsylvania), and Anna Stansbury (MIT) notes:
Whether minimum wages help or harm workplace safety is theoretically unclear. Higher minimum wages might induce employers to cut costs, reducing spending on safety measures, or to push for productivity gains by intensifying the pace of work. Either of these would lead to more injuries. Alternatively, higher minimum wages could lead to safer workplaces by reducing turnover in low-wage labor markets, through efficiency wage-type effects, or by incentivizing capital intensification (which often improves workplace safety).
Davies et al. use data on all workplace worker's compensation insurance claims from California over the period from 2000-2019 (over 13 million claims), and how those claims are related to changes in state and local minimum wages. More specifically, they:
...regress the log annual injury rate of a metro-occupation labor market on the interaction between the minimum wage change (real year-on-year growth in the metro minimum wage) and the metro-occupation’s exposure to that minimum wage change (the estimated share of the wage distribution that falls below 1.3x the local minimum)...
That allows them to focus in on the change in workplace injuries for workers working at or close to the minimum wage. Davies et al. find that:
...minimum wage increases lead to significantly higher injury rates. Our headline estimate is that a 10% increase in the local minimum wage increases the injury rate by 11% in an occupation which is fully exposed to the minimum wage change (i.e. where all workers earn less than 1.3x the minimum).
How meaningful is that change? Davies et al. report that:
The average injury rate for low-wage workers in our data is 4.4% per year; applying our coefficient estimate to these workers, we estimate that a 10% increase in the minimum wage leads to a 0.3 percentage point increase in the injury rate, or on average an additional 3 injuries per 1,000 low-wage workers per year.
If they focus on particular occupations, there are (as seems obvious) some occupations where the effects on workplace injuries are even larger. Davies et al. then go on to explore the mechanisms that may drive the increase in workplace injuries. Is it because employers reduce spending on safety measures, or because they push their workers to work harder? Davies et al. conclude that it is the latter, based on looking at specific injuries that are related to both physical exertion and repeated stress (such as carpal tunnel syndrome or repetitive strain injury). Specifically, they find that:
...the effect of minimum wages is nearly twice as large for these cumulative physical injuries: a 10% minimum wage increase leads to a 21% increase in cumulative physical injuries per worker.
Davies et al. aren't able to adequately test for the reduction in spending on safety mechanism, so it could be that both are contributing to the effect of minimum wages on workplace safety.
However, Davies et al. aren't the only researchers looking at this question. Another new article, by Qing Liu (Renmin University), Ruosi Lu (University of International Business and Economics in Beijing), Stephen Teng Sun (City University of Hong Kong), and Meng Zhang (Capital University of Economics and Business in Beijing), published in the Journal of Public Economics (sorry, I don't see an ungated version online), also looks at minimum wages and workplace safety, but using different data and methods. Specifically, Liu et al. use data from the Occupational Safety and Health Administration (OSHA) over the period from 2002 to 2011:
Each year OSHA surveys approximately 80,000 private-sector establishments, which are required to maintain records of any work-related injury or illness that results in death, loss of consciousness, days away from work, restricted work activity or job transfer, or medical treatment beyond first aid.
Liu et al. match those OSHA employer records with data from CompuStat to identify the parent firms of each establishment, and so their analysis is essentially looking at variation in workplace injuries across establishments within the same parent firm. They focus on 'large' minimum wage changes (of $1 or more), and apply a two-way fixed effects (TWFE) estimator, and separately apply a stacked difference-in-differences research design. Using TWFE, they find that:
...a large increase in state minimum wages raises workplace injury rates by 4.6 percent relative to the sample mean. With an average establishment size of 222 employees, our point estimate implies an additional 0.8 injury cases per year, or 3.2 cases over the first four years post-treatment.
Two-way fixed effects have some well-known problems. When they apply the stacked difference-in-differences approach, Liu et al. find very similar results. Turning to mechanisms, they find that:
...the adverse effect is more pronounced for establishments affiliated with financially constrained parent firms or in industries highly dependent on external finance.
Liu et al. argue that this suggests that financial constraints are the dominant channel driving the increase in workplace injuries, consistent with employers responding to higher minimum wages by decreasing spending on workplace safety. They argue that there is little evidence for changes in work effort, based on an analysis that shows that illnesses are not affected by the minimum wage. Davies et al., however, criticise that analysis because:
...the illnesses these authors cite as motivating examples — “stress, depression, heart diseases, and strokes”... —are conditions for which employers hold considerable discretion in deciding whether to report them to OSHA ((CFR 29 C.F.R. § 1904.5(b)(2)(ix)); and many illnesses for which OSHA mandates reporting are not those which one would expect to be responsive to work intensification (e.g. respiratory disease, hearing loss).
So, what we can take away from these two studies is that higher minimum wages are associated with higher rates of workplace injury, which is an important point that I will return to tomorrow.
[HT: Marginal Revolution, for the Davies et al. paper]
Read more:
- A bunch of research findings on minimum wages in New Zealand
- The disemployment effects of Canadian minimum wages
- 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
- Latest research suggests the minimum wage DOES reduce employment
- More empirical support for the disemployment effects of the minimum wage
- The minimum wage and job vacancies
- The minimum wage and hiring standards
- The employment effects of the minimum wage, from American Community Survey data
- The minimum wage and homelessness
- New York restaurants find a new way to respond to the minimum wage
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