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The effect of minimum wages on low-wage jobs (Cengiz et al., 2019)

  • Findings

    See findings section of this profile.

    Evidence Rating

    Low Causal Evidence

Absence of conflict of interest.

Citation

Cengiz, D., Dube, A., Lindner, A., & Zipperer, B. (2019). The effect of minimum wages on low-wage jobs. Quarterly Journal of Economics, 134(3), 1405–1454. doi:10.1093/qje/qjz014

Highlights

  • The study’s objective was to examine the impact of state minimum wage increases on employment. 

  • The authors used a difference-in-difference design to estimate the impacts of minimum wage increases on employment, using hourly wage data from the 1979 to 2016 Current Population Survey (CPS). They used a statistical model to compare employment over time in wage bins above and below the new minimum wages in states that did and did not implement minimum wage changes.  

  • The study found a significant decrease in employment at wages below the new minimum wage and a significant increase in employment at wages above the minimum wage. The total change in employment was not significantly different from zero.  

  • The quality of causal evidence presented in this report is low because the authors did not ensure that the groups being compared were similar before the intervention. This means we are not confident that the estimated effects are attributable to state minimum wage increases; other factors are likely to have contributed.  

Intervention Examined

State Minimum Wage Increases

Features of the Intervention

States have the ability pass legislation to increase minimum wages for their workers above the federal minimum. Numerous states have done and continue to do so.  

Features of the Study

The authors used a difference-in-difference design to estimate the impacts of state minimum wage increases on employment. They examined 138 prominent state-level minimum wage increases between 1979 and 2016 where the increase was at least $0.25 and at least 2 percent of workers were affected by the increase. Using data from the 1979 to 2016 CPS, the authors compared quarterly state employment in wage bins above and below the new minimum wage, in states that did and did not implement minimum wage changes, for three years before and five years after each change. The authors defined state employment in wage bins as the number of individuals reporting hourly earnings in the bin as a fraction of the state population.  

Findings

The study found a significant decrease in employment at wages below the new minimum wage and a significant increase in employment at wages above the minimum wage. The total change in employment was not significantly different from zero.  

Considerations for Interpreting the Findings

The authors did not account for other factors that could have affected the difference between the workers in wage bins in each state. These preexisting differences between the groups—and not the minimum wage increases—could potentially explain the observed differences in employment. 

Causal Evidence Rating

The quality of causal evidence presented in this report is low because the authors did not ensure that the groups being compared were similar before the intervention. This means we are not confident that the estimated effects are attributable to state minimum wage increases; other factors are likely to have contributed. 

Reviewed by CLEAR

May 2021

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