Effects of the Minimum Wage on Employment Dynamics

Abstract

The voluminous literature on minimum wages offers little consensus on the extent to which a wage floor impacts employment.We argue that the minimum wage will impact employment over time, through changes in growth rather than an immediate drop in relative employment levels.We show that commonly-used specifications in this literature, especially those that include state-specific time trends, will not accurately capture these effects.Using three separate state panels of administrative employment data, we find that the minimum wage reduces job growth over a period of several years.This finding is supported using several empirical specifications.

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