Interestingly, we also find that the benefits of wage spillovers were not equally shared: workers who had a job before the minimum wage increase (incumbents) experienced significant wage spillovers, but we do not find any evidence of such spillovers for new entrants. California, Illinois, Massachusetts, New Jersey, and New York have passed legislation to eventually increase minimum wages to |$$|3 above the minimum wage and represent around 40% of the overall wage increase from minimum wage changes. Minimum wage policies have featured prominently in recent policy debates in the United States at the federal, state, and local levels. We also show how decomposing the overall employment effect by wage bins allows a transparent way of assessing the plausibility of estimates. However, we do find some evidence of reduced employment in tradeable sectors. We also find no evidence of disemployment when we consider higher levels of minimum wages. Our estimates by detailed demographic groups show that the lack of job loss is not explained by labor-labor substitution at the bottom of the wage distribution. At the same time, the direct effect of the minimum wage on average earnings was amplified by modest wage spillovers at the bottom of the wage distribution. We find that the overall number of low-wage jobs remained essentially unchanged over the five years following the increase.
We then focus on the bottom part of the wage distribution and compare the number of excess jobs paying at or slightly above the new minimum wage to the missing jobs paying below it to infer the employment effect. We first estimate the effect of the minimum wage increase on employment changes by wage bins throughout the hourly wage distribution. We estimate the effect of minimum wages on low-wage jobs using 138 prominent state-level minimum wage changes between 19 in the United States using a difference-in-differences approach.
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