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Non-monotonic employment effects by market structure and minimum wage level

Author

Listed:
  • Devereux, Kevin
  • Studnicka, Zuzanna
Abstract
Minimum wages decrease employment in competitive markets, but can increase it in monopsonistic markets so long as they do not exceed the marginal product of labour. We find evidence of non-monotonicity both by market structure and minimum wage level. Minimum wage hikes initially increase hours worked for minimum wage workers (MWWs) in high-concentration local labour markets (LLMs), while increasing job loss likelihood for MWWs in low-concentration LLMs. Repeated hikes reverse initial hours gains, and may increase job loss. Non-MWWs show economically negligible responses throughout. Observing minimum wage status allows for both within- and across-market difference-in-difference designs, whose findings provide mutual support. We combine these into a triple-difference specification. Our results help to resolve the lack of consensus around the sign of the minimum wage's employment effects.

Suggested Citation

  • Devereux, Kevin & Studnicka, Zuzanna, 2024. "Non-monotonic employment effects by market structure and minimum wage level," CLEF Working Paper Series 66, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    • Handle: RePEc:zbw:clefwp:289599
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Minimum wage; Monopsony; Oligopsony; Local labour Markets;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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