2024 AMES in E/SE Asia, Ho Chi Minh City, Vietnam: August, 2024
Non-Monotonic Employment Effects by Market Structure and Minimum Wage Level
Kevin Devereux, Zuzanna Studnicka
Minimum wages decrease employment in competitive markets, but increase it in monopsonistic markets until reaching the marginal product of labour. We find 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. Observing minimum wage status facilitates both within- and across-market difference-in-difference designs, whose findings provide mutual support. We combine these into a triple-difference. Our results resolve the lack of consensus around the minimum wage's employment effects.
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