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“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
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Research on minimum-wage policy and its effects on pay, employment, hours, prices, automation, firm behavior, and inequality. Coverage compares results across places, industries, worker groups, and policy designs.
AI Summary.Using American Community Survey data, the authors estimate that small minimum wage increases had no effect on employment while large increases had negative effects. Four years after the first increase, estimated employment effects approached −5pp for those aged 16–25 without a completed high school education and −3pp for all 16–21 year-olds.
Jeffrey Clemens and Michael StrainAmerican Enterprise Institute
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While a state-level event study finds no employment effect from small minimum-wage hikes, imputation DiD estimates show that four years after large hikes, employment is ~5pp lower for 16–25-year-olds without a HS degree and ~3pp lower for all 16–21-year-olds.
Do large minimum wage increases reduce employment while small ones do not?
Core argument: Four years after enactment of the first increase, large minimum wage increases are estimated to reduce employment by roughly 5pp among individuals aged 16–25 without a completed high school education and about 3pp among all individuals aged 16–21.
Figure 4 reports our imputation difference-in-differences estimates for the effects of small and large minimum wage changes on employment among individuals aged 16–21 and among individuals aged 16–25 with less than a completed high school education. The samples are from the ACS [American Community Survey]. [The data span 2011-2019]. We compare estimates for large versus small increases. The estimates to the left of the vertical dashed lines reveal no concerning evidence of divergent preexisting trends. We find null effects for the states that enacted small minimum wage increases and negative effects for states with large minimum wage increases. By 4 years after the enactment of the first increase, the estimate has approached −5pp for individuals aged 16–25 with less than a completed high school education, and −3pp for the sample of all individuals aged 16–21. [Editor's note: The authors note that Section VIII of the paper, which contains the Figure 4 imputation DiD estimates, “presents estimates from a modern difference-in-differences estimator that falls outside of our pre-analysis plan.” The results are somewhat larger than those reported in the Abstract.]
Takeaways by Macro Roundup® AI
Four years after enactment of the first increase, large minimum wage increases are estimated to reduce employment by roughly 5pp among individuals aged 16–25 without a completed high school education and about 3pp among all individuals aged 16–21.
States enacting small minimum wage increases show null employment effects, while states with large increases show negative effects, based on imputation difference-in-differences estimates using American Community Survey data spanning 2011–2019.
The estimates for periods before enactment reveal no concerning evidence of divergent preexisting trends.
Did California’s Fast Food Minimum Wage Reduce Employment?— The authors estimate that California's $20 fast food minimum wage, up from $16, raised fast food sector wages roughly 8% relative to the rest of the country while employment fell about 2.7% relative to fast food employment elsewhere in the US. Their median estimate implies 18,000 fewer California fast food jobs than otherwise.
Minimum Wages and the Rise of the Robots— State-level measures of exposure to industrial robots show substantial geographic variation across the US, with the highest concentrations in the Southwest, Midwest, and Northwest and the lowest in the Mountain West, parts of the South, and northern regions. The authors find state robot exposure is positively correlated with state minimum wage increases.
AI Summary.State-level measures of exposure to industrial robots show substantial geographic variation across the US, with the highest concentrations in the Southwest, Midwest, and Northwest and the lowest in the Mountain West, parts of the South, and northern regions. The authors find state robot exposure is positively correlated with state minimum wage increases.
Erik Brynjolfsson, J. Frank Li, Javier Miranda, Robert Seamans, et al.Stanford University
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Across US states, a 10pp higher growth rate of the minimum wage over 1992–2021 was associated with an ~8% higher-than-expected installation of industrial robots.
Do higher state minimum wages increase adoption of industrial robots?
Core argument: A 0.0056 increase in robot exposure amounts to roughly 0.0056 more excess robots per 100 baseline workers, equal to 8% of the 0.07 mean state excess robot accumulation over the period.
We construct state-level long-difference measures of exposure to industrial robots by combining robot installation information from [several agencies]. Figure 1a displays our robot exposure measure, [revealing] significant geographic variation in robot exposure across U.S. states, with the color gradient ranging from light blue (minimal change) to dark navy (maximum change). States in the Southwest, Midwest, and Northwest show the highest concentrations of robot exposure, reflecting strong manufacturing sectors and states in the Mountain West, parts of the South, and Northern regions, show minimal robot exposure consistent with less dependence on manufacturing. Figure 1b displays state-level minimum wage changes covering the period 2003–2015. The map reveals substantial geographic variation in minimum wage policy exposure across U.S. states, with the gradient ranging from light blue (minimal change) to dark navy (maximum change). Finally, Figure 1c displays a strong positive correlation in the relationship between the state-level robot exposure and the minimum wage measures. [The .0056 increase in robot exposure is 8% of the 0.07 mean — meaning roughly 0.0056 more excess robots per 100 baseline workers, which is 8% of the average state's excess robot accumulation over the period].
Takeaways by Macro Roundup® AI
A 0.0056 increase in robot exposure amounts to roughly 0.0056 more excess robots per 100 baseline workers, equal to 8% of the 0.07 mean state excess robot accumulation over the period.
State-level robot exposure and state-level minimum wage changes over 2003–2015 show a strong positive correlation across U.S. states in the authors' long-difference measures.
Robot exposure is concentrated in Southwest, Midwest, and Northwest states with strong manufacturing sectors, while the Mountain West, parts of the South, and Northern regions show minimal exposure.
Related Articles:
The Mysterious Slowdown in U.S. Manufacturing Productivity— US manufacturing labor productivity growth slowed broadly after the Great Recession, with the four largest firms in each industry averaging –0.5% growth from 2010 to 2022 versus 3.7% from 1987 to 2007, and smaller follower firms showing an identical 4.2 percentage-point decline. The authors find the slowdown spans all industries and firm sizes.
What Would It Take to Bring Back US Manufacturing? Part 2: Making American Manufacturing More Productive— The authors argue the United States is a decade away from the scale of automated "lights-out" manufacturing needed to meet its own end-to-end demand at comparable cost. With 98% of US manufacturers being small or medium enterprises, low deployment of mature productivity technologies reflects limited commercial adoption and investment rather than technical readiness.
Did California’s Fast Food Minimum Wage Reduce Employment?— The authors estimate that California's $20 fast food minimum wage, up from $16, raised fast food sector wages roughly 8% relative to the rest of the country while employment fell about 2.7% relative to fast food employment elsewhere in the US. Their median estimate implies 18,000 fewer California fast food jobs than otherwise.
AI Summary.Thirty US states have set minimum wages above the federal minimum of $7.25 an hour, with increases coming from inflation-pegged adjustments, new laws or ballot measures in both Democratic- and Republican-controlled states. More workers now live in states with minimums of $15 or higher than in states at $7.25.
Jared MitovichWall Street Journal
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8.3 million workers across 19 states will be impacted this year by minimum wage increases due to inflation adjustments, legislative increases, or ballot measures.
Are state minimum wages rising above the federal minimum nationwide?
Core argument: Thirty states have set minimum wages above the federal floor of $7.25 an hour, with increases this year in both Democratic- and Republican-controlled states.
Workers in a mix of Democratic- and Republican-controlled states will see higher hourly pay this year because of automatic inflation-pegged adjustments, new laws or ballot measures. Thirty states have now set a higher minimum wage than the federal minimum of $7.25 an hour. For the first time, more workers now live in states that pay $15 or higher per hour than those that have kept the $7.25 minimum.
Takeaways by Macro Roundup® AI
Thirty states have set minimum wages above the federal floor of $7.25 an hour, with increases this year in both Democratic- and Republican-controlled states.
For the first time, more workers live in states with minimum wages of $15 or higher than in states that have kept the $7.25 federal minimum.
The higher hourly pay stems from automatic inflation-pegged adjustments, new laws and ballot measures.
Related Articles:
Did California’s Fast Food Minimum Wage Reduce Employment?— The authors estimate that California's $20 fast food minimum wage, up from $16, raised fast food sector wages roughly 8% relative to the rest of the country while employment fell about 2.7% relative to fast food employment elsewhere in the US. Their median estimate implies 18,000 fewer California fast food jobs than otherwise.
Do Minimum Wages Reduce Job Opportunities for Blacks?— The authors find evidence that higher minimum wages reduce employment among low-skill Black workers across every group examined — teens, high school dropouts, and young workers with at most a high school education — with larger effects for Black males, while such effects are not very detectable for whites.
“Compensate the Losers?” Economic Policy and Partisan Realignment in the US— The authors argue that partisan realignment by education reflects Democrats' declining supply of "predistribution" policies such as job guarantees, higher minimum wages, protectionism, and stronger unions, which less-educated Americans favor while more-educated Americans prefer taxes and transfers. They estimate changing views of the parties' economic policies explain roughly half the shift.
AI Summary.An economist projects that within 50 years technological advances will roughly double the average American's inflation-adjusted income, while substantial inequality persists. The forecast also anticipates a more robust safety net including a modest universal basic income, higher taxes and a value-added tax, shorter work weeks, and fewer heavy-handed market interventions.
Greg MankiwWall Street Journal
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Looking fwd 50 years, Mankiw forecasts “heavy handed” state intervention in competitive US markets (such as industrial policy, tariffs and minimum wages) will decline, arguing “The arc of the economic universe is long, but it bends toward efficiency.”
How will technology, taxes, and the safety net reshape American capitalism?
Core argument: One contributor projects that technological advances will roughly double the average American's inflation-adjusted income within 50 years, while substantial inequality persists and populist agitators continue to argue that elites have rigged the economy.
If I squint, some patterns for the U.S. economy 50 years from now take shape. Thanks to advances in technology, the income of the average American, adjusted for inflation, will be about twice what it is today. Substantial inequality will persist, and populist agitators will continue to argue that the elites have rigged the economy. Partly as a response, the social safety net will become more robust, including a modest universal basic income. Taxes will be higher to fund the expanded safety net, and because people will have learned that government debt relative to GDP cannot rise forever. Like most of the world today, the U.S. will have a value-added tax. Work weeks will be shorter due to both the disincentive effect of higher taxes and the desire of most people to use their greater prosperity to enjoy more leisure. Acknowledging past mistakes, the government will eschew most heavy-handed interventions in competitive markets, such as industrial policy, tariffs, minimum wages, rent control and Nimby zoning. These developments will be deemed desirable by most of the public and economists at the time. To paraphrase Martin Luther King Jr., if he were an economist: The arc of the economic universe is long, but it bends toward efficiency.
Takeaways by Macro Roundup® AI
One contributor projects that technological advances will roughly double the average American's inflation-adjusted income within 50 years, while substantial inequality persists and populist agitators continue to argue that elites have rigged the economy.
The projection includes a more robust social safety net with a modest universal basic income, funded by higher taxes and a value-added tax, partly because people will have learned that government debt relative to GDP cannot rise forever.
Work weeks are forecast to shorten, reflecting both the disincentive effect of higher taxes and a desire to spend greater prosperity on leisure, with government eschewing industrial policy, tariffs, minimum wages, rent control and Nimby zoning.
Related Articles:
The Fiscal Future— US debt is on an upward trajectory, and the author argues that extraordinary growth, default, money creation, and spending cuts are each implausible or unacceptable, leaving large tax increases. US governments collect about 28% of GDP in taxes versus 35% in the UK and 46% in France, and a value-added tax could close the roughly 4%-of-GDP fiscal gap.
Living with High Public Debt— High public debt ratios are likely to persist because large sustained primary budget surpluses are politically unrealistic, real interest rates are already very low, faster global growth is hard to engineer, inflation is not a sustainable route to reducing debt, and financial repression is less feasible amid liberalized markets.
Life Under Two: Debt, Deficits, and the AI Discontinuity— The United States averaged annual GDP growth above 3% for decades, but 2% or less is now more likely. Over ten years, the author estimates that gap amounts to a $3.36tn larger economy, $3.7tn more tax revenue, and 6m more jobs, shifting public psychology from abundance toward scarcity.
AI Summary.The authors estimate that California's $20 fast food minimum wage, up from $16, raised fast food sector wages roughly 8% relative to the rest of the country while employment fell about 2.7% relative to fast food employment elsewhere in the US. Their median estimate implies 18,000 fewer California fast food jobs than otherwise.
Jeffrey Clemens, Olivia Edwards and Jonathan MeerNational Bureau of Economic Research
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The 2024 rise in CA’s minimum wage in fast food restaurants from $16 to $20 raised the sector’s wages ~8% and lowered its employment by 2 to 4% relative to the US sector overall, with an estimated loss of 18,000 CA fast food jobs. @jeffreypclemens
Did a higher fast food minimum wage reduce fast food employment?
Core argument: Employment in California's fast food sector fell 2.7% relative to the fast food sector elsewhere in the United States from September 2023 through September 2024, in unadjusted Quarterly Census of Employment and Wages data.
We analyze the effect of California's $20 fast food minimum wage [up from $16], which was enacted in September 2023 and went into effect in April 2024, on employment in the fast food sector. We document that AB 1228 increased wages substantially, with a roughly 8% increase in California’s fast food sector relative to the fast food sector elsewhere in the country. In unadjusted data from the Quarterly Census of Employment and Wages, we find that employment in California's fast food sector declined by 2.7% relative to employment in the fast food sector elsewhere in the United States from September 2023 through September 2024. In Figures 1b, 1c, and 1d, for which each series has been indexed relative to September 2023, the magnitude of the relative decline through late 2024 is readily observed from the graphs as being on the order of 2 to 4%. Indexing, detrending, and seasonally adjusting the data make the series more visually comparable but do not substantively alter the relative movements that underlie our regression estimates. Our median estimate translates into a loss of 18,000 jobs in California's fast food sector relative to the counterfactual.
Takeaways by Macro Roundup® AI
Employment in California's fast food sector fell 2.7% relative to the fast food sector elsewhere in the United States from September 2023 through September 2024, in unadjusted Quarterly Census of Employment and Wages data.
California's AB 1228, which raised the fast food minimum wage to $20 from $16 effective April 2024, increased wages in the state's fast food sector by roughly 8% relative to the sector elsewhere in the country.
The median estimate implies a loss of 18,000 jobs in California's fast food sector relative to the counterfactual, with indexed series showing relative declines through late 2024 on the order of 2 to 4%.
Related Articles:
The U.S. Low-Wage Structure: A McWage Comparison— Using wage data from most U.S. McDonald's restaurants, the authors find that before the Covid-19 pandemic, differences in entry-level wages across states were strongly related to state minimum wages, with real wages rising only in the roughly half of states raising their minimums. The 2021 wage spike nearly eliminated those geographic differences and left the federal minimum wage near-irrelevant.
Do Minimum Wages Reduce Job Opportunities for Blacks?— The authors find evidence that higher minimum wages reduce employment among low-skill Black workers across every group examined — teens, high school dropouts, and young workers with at most a high school education — with larger effects for Black males, while such effects are not very detectable for whites.
Why Do Labor Unions Advocate for Minimum Wage Increases?— Using variation in U.S. state minimum wages, the authors estimate that each $1 increase predicts a 5% (0.3 percentage point) rise in the likelihood of union membership among people ages 16–40. Membership declines among the minimum wage's most direct beneficiaries, consistent with free-riding, while gains occur among broader groups not directly affected.
AI Summary.Using variation in U.S. state minimum wages, the authors estimate that each $1 increase predicts a 5% (0.3 percentage point) rise in the likelihood of union membership among people ages 16–40. Membership declines among the minimum wage's most direct beneficiaries, consistent with free-riding, while gains occur among broader groups not directly affected.
Jeffrey Clemens and Michael StrainAmerican Enterprise Institute
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During the 2010s, a $1 increase in a state’s minimum wage “predicts a 5% (0.3 pp) rise in the likelihood of union membership among individuals ages 16-40,” all from “groups that are not directly affected by the minimum wage.” @MichaelRStrain
Do minimum wage increases raise union membership?
Core argument: Using variation in U.S. states' minimum wages during the 2010s, the authors estimate that each $1 increase in the minimum wage predicts a 5 percent (0.3 percentage point) rise in the likelihood of union membership among individuals ages 16–40.
Over the past decade, organized labor has played a significant role in advocating for minimum wage increases. Why might this be, given that the minimum wage may act as a substitute for the bargaining power offered by labor unions? In this paper, we study the interplay between minimum wages and union membership. Using variation in U.S. states’ minimum wages during the 2010s, we estimate that each dollar in minimum wage increase predicts a 5 percent increase (0.3 pp) in the likelihood of union membership among individuals ages 16–40. Consistent with a classic “free-riding” hypothesis, however, we find that minimum wage increases predict declines in union membership among the minimum wage’s most direct beneficiaries. Instead, increases in union membership occur among much broader groups that are not directly affected by the minimum wage. A variety of non-monetary motivations may be at work. Coalition politics, for example, can shape the strategies and tactics of unions as well as the outlooks of their members, [and] policy advocacy may bolster an interest group’s cause by enhancing its public image.
Takeaways by Macro Roundup® AI
Using variation in U.S. states' minimum wages during the 2010s, the authors estimate that each $1 increase in the minimum wage predicts a 5 percent (0.3 percentage point) rise in the likelihood of union membership among individuals ages 16–40.
Consistent with a "free-riding" hypothesis, the authors find that minimum wage increases predict declines in union membership among the minimum wage's most direct beneficiaries, while gains occur among broader groups not directly affected.
The authors point to possible non-monetary motivations for labor's advocacy, including coalition politics shaping union strategies, tactics, and members' outlooks, and policy advocacy bolstering an interest group's cause by enhancing its public image.
Related Articles:
“Compensate the Losers?” Economic Policy and Partisan Realignment in the US— The authors argue that partisan realignment by education reflects Democrats' declining supply of "predistribution" policies such as job guarantees, higher minimum wages, protectionism, and stronger unions, which less-educated Americans favor while more-educated Americans prefer taxes and transfers. They estimate changing views of the parties' economic policies explain roughly half the shift.
Do Minimum Wages Reduce Job Opportunities for Blacks?— The authors find evidence that higher minimum wages reduce employment among low-skill Black workers across every group examined — teens, high school dropouts, and young workers with at most a high school education — with larger effects for Black males, while such effects are not very detectable for whites.
Menu Adjustment in Response to the Minimum Wage: A Return to the New Jersey-Pennsylvania Border— Comparing New Jersey restaurant menu prices with those in neighboring Pennsylvania, where the minimum wage was unchanged, the authors estimate that each $1 increase in the minimum wage raised the price of an item by 7.0 cents on average. Pass-through was larger for items requiring more employee preparation steps, adding 0.3 cents per additional step.
AI Summary.Comparing New Jersey restaurant menu prices with those in neighboring Pennsylvania, where the minimum wage was unchanged, the authors estimate that each $1 increase in the minimum wage raised the price of an item by 7.0 cents on average. Pass-through was larger for items requiring more employee preparation steps, adding 0.3 cents per additional step.
Kerry Papps and Michael StrainIZA Institute of Labor Economics
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.@MichaelRStrain @AEIecon evaluates minimum wage increases between 2019-24, and finds a $1 increase in the minimum wage increased the mean price of fast food items by 7¢, implying a “pass-through elasticity of around 0.13.”
How much do restaurant menu prices rise with the minimum wage?
Core argument: Using neighboring Pennsylvania, where the minimum wage was unchanged, as a control group in a difference-in-difference specification, the study finds substantially larger pass-through coefficients on items requiring more employee preparation steps.
In early 2019, New Jersey passed legislation raising the minimum wage to $15 over the following 5 years. The first phase of this took effect on July 1, 2019, when the minimum wage increased from $8.85 to $10, the second phase raised it to $11 on January 1, 2020, and the third phase raised it to $12 on January 1, 2021. The minimum wage was unchanged during this period in neighboring Pennsylvania, therefore this state provides an appropriate control group. Using a difference-in-difference specification, we find that these three rounds of minimum wage increases collectively raised the price of an item by 20.6 cents on average or that every $1 increase in the minimum wage raises prices by 7.0 cents. Prices should rise the most on items that are highly labor intensive and for which consumers have a greater taste for variety. Consistent with this, we find substantially larger pass through coefficients on items that require more steps by employees to prepare. For every additional preparation step, a $1 minimum wage increase raises the price of an item by an additional 0.3 cents.
Takeaways by Macro Roundup® AI
Using neighboring Pennsylvania, where the minimum wage was unchanged, as a control group in a difference-in-difference specification, the study finds substantially larger pass-through coefficients on items requiring more employee preparation steps.
For every additional preparation step, a $1 minimum wage increase raises an item's price by an additional 0.3 cents, consistent with larger increases on labor-intensive items.
Related Articles:
What’s Across the Border? Re-Evaluating the Cross-Border Evidence on Minimum Wage Effects— Earlier research using pairs of neighboring counties straddling state borders found no relationship between minimum wages and U.S. restaurant employment, but the authors show that result reverses when local economic areas are instead defined as multi-state commuting zones. Under that definition, they estimate an employment elasticity of −0.305 four years after a minimum wage change.
The U.S. Low-Wage Structure: A McWage Comparison— Using wage data from most U.S. McDonald's restaurants, the authors find that before the Covid-19 pandemic, differences in entry-level wages across states were strongly related to state minimum wages, with real wages rising only in the roughly half of states raising their minimums. The 2021 wage spike nearly eliminated those geographic differences and left the federal minimum wage near-irrelevant.
Do Minimum Wages Reduce Job Opportunities for Blacks?— The authors find evidence that higher minimum wages reduce employment among low-skill Black workers across every group examined — teens, high school dropouts, and young workers with at most a high school education — with larger effects for Black males, while such effects are not very detectable for whites.
AI Summary.The authors find evidence that higher minimum wages reduce employment among low-skill Black workers across every group examined — teens, high school dropouts, and young workers with at most a high school education — with larger effects for Black males, while such effects are not very detectable for whites.
David Neumark and Jyotsana KalaNational Bureau of Economic Research
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Reviewing the impact of minimum wage increases on employment over 2009 – 2019, @NeumarkEcon finds strong negative employment effects on low-skilled black workers and little impact on low-skilled white workers.
Do higher minimum wages reduce employment for low-skill Black workers?
Core argument: The authors find job loss effects from higher minimum wages are much more evident for blacks and not very detectable for whites, with the estimated minimum wage effect negative for every low-skill black group considered.
We find evidence that job loss effects from higher minimum wages are much more evident for blacks, and in contrast not very detectable for whites. The overall estimated minimum wage effect for blacks is negative for every low skill group we consider. For the overall effects, these include: teens; high school dropouts; under 30, high school dropouts; under 30, with at most a high school education; and under 25, with at most a high school education. In general, when we consider low education (high school dropouts), or combinations of low education (up to at most a high school education) and being young, there is clear evidence of adverse effects of minimum wages on black employment – and more so for males. In addition, when we look at [employment] elasticities [in Figure 14], the race differences are more pronounced, because for every group we consider the employment rate is lower for blacks.
Takeaways by Macro Roundup® AI
The authors find job loss effects from higher minimum wages are much more evident for blacks and not very detectable for whites, with the estimated minimum wage effect negative for every low-skill black group considered.
Adverse minimum wage effects on black employment are evident for high school dropouts and for young workers with at most a high school education, and more so for males, across groups including teens, those under 30, and those under 25.
Race differences are more pronounced in employment elasticities because the employment rate is lower for blacks in every group the authors consider.
Related Articles:
What’s Across the Border? Re-Evaluating the Cross-Border Evidence on Minimum Wage Effects— Earlier research using pairs of neighboring counties straddling state borders found no relationship between minimum wages and U.S. restaurant employment, but the authors show that result reverses when local economic areas are instead defined as multi-state commuting zones. Under that definition, they estimate an employment elasticity of −0.305 four years after a minimum wage change.
The U.S. Low-Wage Structure: A McWage Comparison— Using wage data from most U.S. McDonald's restaurants, the authors find that before the Covid-19 pandemic, differences in entry-level wages across states were strongly related to state minimum wages, with real wages rising only in the roughly half of states raising their minimums. The 2021 wage spike nearly eliminated those geographic differences and left the federal minimum wage near-irrelevant.
Who Paid Los Angeles’ Minimum Wage? A Side-by-Side Minimum Wage Experiment in Los Angeles County— A study of minimum wage increases in Los Angeles County finds restaurants in high-income areas raised prices by 5.9 percentage points more than those in areas under the state wage, while restaurants in low-income neighborhoods did not significantly raise prices but changed menus more often and closed at higher rates.
