The Effects of Increasing the Minimum Wage on Prices- Analyzing t
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The Effects of Increasing the Minimum Wage on Prices- Analyzing t
WEUPJOHN INSTITUTE FOR EMPLOYMENT RESEARCHUpjohn Institute Working PapersUpjohn Research home page42522The Effects of Increasing the Minimum Wage on P The Effects of Increasing the Minimum Wage on Prices- Analyzing tPrices: Analyzing the Incidence of Policy Design and ContextDaniel MacDonaldCalifornia State University. San BernardinoEric NilssonCalifornia State University. San BernardinoUpjohn Institute working paper; 16-260Follow this and additional works at: https://research.upjohn.org/up_v/orkingpapersCz Par The Effects of Increasing the Minimum Wage on Prices- Analyzing tt of the Income Distribution Commons, and the Labor Economics CommonsCitationMacDonald. Daniel and Eric Nilsson. 2016. The Effects of Increasing the MThe Effects of Increasing the Minimum Wage on Prices- Analyzing t
inimum Wage on Prices: Analyzing the Incidence of Policy Design and Context" Upjohn Institute Working Paper 16-260.Kalamazoo, Ml W.E. Upjohn InstituteWEUPJOHN INSTITUTE FOR EMPLOYMENT RESEARCHUpjohn Institute Working PapersUpjohn Research home page42522The Effects of Increasing the Minimum Wage on P The Effects of Increasing the Minimum Wage on Prices- Analyzing t repository@upjohn org.w' UPJOHN INSTITUTEFOR FMPIjOYMENT researchUnearthing the iau\a and cnmrqurturt ơf unca^mafDtThe Effects of Increasing the Minimum W age on Prices: Analyzing the Incidence of Policy Design and ContextUpjohn Institute Working Paper 16-260Daniel MacDonald and Eric Nilsson Califo The Effects of Increasing the Minimum Wage on Prices- Analyzing trnia State University, San Bernardino42522ABSTRACTWe analyze the price pass-through effect of the minimum wage and use the results to provide insightThe Effects of Increasing the Minimum Wage on Prices- Analyzing t
into the competitive structure of low-wage labor markets. Using monthly price series, we find that the pass-through effect is entirely concentrated onWEUPJOHN INSTITUTE FOR EMPLOYMENT RESEARCHUpjohn Institute Working PapersUpjohn Research home page42522The Effects of Increasing the Minimum Wage on P The Effects of Increasing the Minimum Wage on Prices- Analyzing tsults differ from that literature, noting the impact of series interpolation in generating most of the previous results. We then use the variation in the size of the minimum wage change to evaluate the competitive nature of low-wage labor markets. Finally, we exploit the rich variation in minimum wa The Effects of Increasing the Minimum Wage on Prices- Analyzing tge policy of the last 10-15 years—including the rise of state-and city-level minimum wage changes and the increased use of indexation—to investigate hThe Effects of Increasing the Minimum Wage on Prices- Analyzing t
ow the extent of price pass-through varies by policy context. This paper contributes to the literature by clarifying our understanding of the dynamicsWEUPJOHN INSTITUTE FOR EMPLOYMENT RESEARCHUpjohn Institute Working PapersUpjohn Research home page42522The Effects of Increasing the Minimum Wage on P The Effects of Increasing the Minimum Wage on Prices- Analyzing tprices.JEL Classification Codes: B. J48, JI 1Key Words: Minimum wage, pass-through effect, monopsony, public policyAcknowledgmentsMacDonald thanks the W E. upjolui Institute’s Early Career Research Award program for financial support (Early Career Research Award 15-150-08).Lu recent years, partly du The Effects of Increasing the Minimum Wage on Prices- Analyzing te to inaction among lawmakers to raise the federal minimum wage, states and cities have increasingly passed their own minimum wage laws. These state aThe Effects of Increasing the Minimum Wage on Prices- Analyzing t
nd city laws promoted a renaissance in the study of the employment effect of minimum wage hikes for two main reasons. First, they created greater numbWEUPJOHN INSTITUTE FOR EMPLOYMENT RESEARCHUpjohn Institute Working PapersUpjohn Research home page42522The Effects of Increasing the Minimum Wage on P The Effects of Increasing the Minimum Wage on Prices- Analyzing tnd city law makers created die opportunity to employ “natural experiments” whereby the employment statistics in a state that increased its minimum wage could be compared to those in surrounding stales lhal did not increase then- minimum wage. Because of this renaissance, two sides of the minimum wag The Effects of Increasing the Minimum Wage on Prices- Analyzing te research developed. One side found that, contrary to the previously accepted belief, some minimum wage hikes led to either no decline in employmentThe Effects of Increasing the Minimum Wage on Prices- Analyzing t
or a slight increase in employment (e.g., Card and Krueger 1994. 1995; Dube. Lester, and Reich 2010). A second side continued to find evidence supportWEUPJOHN INSTITUTE FOR EMPLOYMENT RESEARCHUpjohn Institute Working PapersUpjohn Research home page42522The Effects of Increasing the Minimum Wage on P The Effects of Increasing the Minimum Wage on Prices- Analyzing this research can be found in Belman and Wolfson (2014).An additional important, although less-studied, question addresses the impact such hikes have on output prices, that is, the “pass-tlnough" effect. Early studies include Wessels (1980) and Card and Krueger (1995 ). The most influential of these The Effects of Increasing the Minimum Wage on Prices- Analyzing tstudies, however, has been a series of papers by Daniel Aaronson and coauthors. Aaronson (2001). MacDonald and Aaronson (2006). Aaronson and French (2The Effects of Increasing the Minimum Wage on Prices- Analyzing t
007), and Aaronson. French, and MacDonald (2008) find evidence for the claim that minimum wage hikes increase output prices and that the size of this WEUPJOHN INSTITUTE FOR EMPLOYMENT RESEARCHUpjohn Institute Working PapersUpjohn Research home page42522The Effects of Increasing the Minimum Wage on P The Effects of Increasing the Minimum Wage on Prices- Analyzing tncluded the existence of various market frictions arising from imperfect competition or search (e.g.. Bhaskar and To 1999; Lang and Khan 199S).1completely passed along to consumers.2 Aaronson and coauthors used their findings to argue that low-wage labor markets are highly competitive and. by implic The Effects of Increasing the Minimum Wage on Prices- Analyzing tation, that minimum wage hikes necessarily lower employment. This literature on pass-though. then, is important both in itself and because it sheds inThe Effects of Increasing the Minimum Wage on Prices- Analyzing t
direct light on the ongoing debate over the employment effect of minimum wage hikes.This paper contributes to the literature on price pass-through by WEUPJOHN INSTITUTE FOR EMPLOYMENT RESEARCHUpjohn Institute Working PapersUpjohn Research home page42522The Effects of Increasing the Minimum Wage on P The Effects of Increasing the Minimum Wage on Prices- Analyzing the competitive structure of low-wage labor markets, hl particular, we find that the size of the pass-through effect is much smaller than previously reported, and that the characteristics of pass-through are more consistent with a model of the labor market based on some degree of market power on the The Effects of Increasing the Minimum Wage on Prices- Analyzing tdemand side than they are with perfect competition. Additionally, we exploit the rich variation in minimum wage policy—the rise of state- and cityleveThe Effects of Increasing the Minimum Wage on Prices- Analyzing t
l minimum wages, as well as the increased use of indexation of the minimum wage to the CPI in areas such as Florida. Washington, Ohio, and San FrancisWEUPJOHN INSTITUTE FOR EMPLOYMENT RESEARCHUpjohn Institute Working PapersUpjohn Research home page42522The Effects of Increasing the Minimum Wage on P The Effects of Increasing the Minimum Wage on Prices- Analyzing then the minimum wage is indexed to inflation and does not vary significantly depending on whether the minimum wage change happens at the federal or state level. The Effects of Increasing the Minimum Wage on Prices- Analyzing tWEUPJOHN INSTITUTE FOR EMPLOYMENT RESEARCHUpjohn Institute Working PapersUpjohn Research home page42522The Effects of Increasing the Minimum Wage on PGọi ngay
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