History of the US Minimum Wage
Paul Wolfson
for
Minimum Wages: Modern Theory & Practice
Mexico City, 2016
3 Periods of the U.S. Minimum Wage
Policy & Empirical Analysis
• Progressive-Institutionalist: 1900-1950
• Neo-Classical: 1950-2000
• Empirical: 2000• Roots of each period precede the start date by several years
Organizing Concepts of Institutional Economics
• Ownership & property rights
• Institutions
• Sovereignty
• Model of the human agent
• Transactions and transaction cost
• Modes of coordination
• Power
• Reasonable value
Early Arguments Against the MW
• Laissez-faire School: freedom of contract
• Marginalist School: dis-employment effects
Progressive-IE Arguments for the MW
• Unequal bargaining power (employees/employers)
• Macro-economic stability
• Increase (average) firm productivity
• Increase (average) labor productivity
http://tinyurl.com/BelmanWolfson-conclusion
Employment and the NMWR
http://tinyurl.com/BowenAward
Our Data
• Begin with 60 studies of the effect on employment using
U.S. data in the last 15 years
• Why 15 years?
• AER 2000 exchange between Neumark & Wascher and Card &
Krueger marked end of the 1st period of New MW Research
• Focus has been: is there a statistically significant effect?
• Not all studies report results in standard units
• Able to gather (elasticity, SE) pairs from 37 studies
• From these, 739 observations: 1 to 86 estimates per study
Employment and the NMWR
Employment and the NMWR
Meta-Analysis
• Simplest application: combine similar studies to
• increase sample size
• improve statistical properties of overall estimate
• More complicated application: recognize
• Publication bias – some studies never published because of
“undesirable” results
• Systematic differences in studies  systematic differences
in results
• Meta-analysis
• Generates an overall estimate purged of publication bias
• Allows for understanding affect of systematic difference
Employment and the NMWR
Publication Bias
• Desire for statistically significant result
• Desired outcome
• Sign
• Size
• Estimates that should be included do not exist
• Not correcting for this biases the meta-estimate
• Different perspectives of economic & statistics
Employment and the NMWR
Systematic Differences (Heterogeneity)
• Dependence among estimates from same study
• Study design
• Dataset / Data sources
• Period covered
• Other Factors
Employment and the NMWR
MetaRegression
• WP @ SSRN:
• 15 Years of Research on U.S. Employment and the
Minimum Wage
• Details the technique of Metaregression
• Estimate the equation

elasticity k  b0  b1 sek  X  uk , uk ~ N 0, sek2
• X: variables to control systematic heterogeneity
• b0: meta-estimate of the elasticity
2
se
k
• Weight each observation by
Employment and the NMWR

Point MetaEstimates
WLS: elasticity
Coef.
t-stat
“Average”
(-0.09, -0.05)
(-4.6, -2.8)
Teenagers*
(-0.13, -0.11)
(-11, -2.9)
Eating & Drinking Establishments*
(-0.04, -0.02)
(-8.5, -1.0)
*Estimated only on appropriate subsample
Employment and the NMWR
Conclusions
• Work in Progress- results are provisional
• Evidence of “little to modest” publication bias
• Most apparently due to reluctance to publish statistically
insignificant results
• Overall – detectible small elasticity: ~-0.08
• Teens - elasticity is small but detectable: ~-0.12
• Restaurants - barely detectable elasticity: ~−0.03
Employment and the NMWR