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David Neumark - One of the best experts on this subject based on the ideXlab platform.
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who pays for and who benefits from Minimum Wage increases evidence from israeli tax data on business owners and workers
Research Papers in Economics, 2019Co-Authors: Lev Drucker, Katya Mazirov, David NeumarkAbstract:A key goal of a higher Minimum Wage is income redistribution towards low-income families. Existing research on the Minimum Wage focuses on the impact on affected workers, but is silent on the incomes of the owners of businesses who pay for a higher Minimum Wage. Higher Minimum Wages will do more to redistribute income if the owners of businesses who pay the Minimum Wage are nearer the top of the income distribution, and vice versa. We study evidence on the incidence of the Minimum Wage on the incomes of business owners using a unique administrative dataset on the universe of tax records for Israel, in the period surrounding a large Minimum Wage increase. We find that the Minimum Wage hike reduced profits of companies, with Minimum-Wage intensive companies bearing the bulk of the cost and adjusting their workforces more aggressively. Notably, profits declined more for lower-income business owners. Moreover, owners of businesses with higher shares of Minimum-Wage workers ranked at the bottom of the income distribution of business owners. In addition, spouses of business owners earn less than the owners while Minimum Wage workers have higher earning spouses, further reducing the redistributive effect of the Minimum Wage.
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who pays for and who benefits from Minimum Wage increases evidence from israeli tax data on business owners and workers
Social Science Research Network, 2019Co-Authors: Lev Drucker, David Neumark, Katya MazirovAbstract:A key goal of a higher Minimum Wage is income redistribution towards low-income families. Existing research on the Minimum Wage focuses on the impact on affected workers, but is silent on the incomes of the owners of businesses who pay for a higher Minimum Wage. Higher Minimum Wages will do more to redistribute income if the owners of businesses who pay the Minimum Wage are nearer the top of the income distribution, and vice versa. We study evidence on the incidence of the Minimum Wage on the incomes of business owners using a unique administrative dataset on the universe of tax records for Israel, in the period surrounding a large Minimum Wage increase. We find that the Minimum Wage hike reduced profits of companies, with Minimum-Wage intensive companies bearing the bulk of the cost and adjusting their workforces more aggressively. Notably, profits declined more for lower-income business owners. Moreover, owners of businesses with higher shares of Minimum-Wage workers ranked at the bottom of the income distribution of business owners. In addition, spouses of business owners earn less than the owners while Minimum Wage workers have higher earning spouses, further reducing the redistributive effect of the Minimum Wage increase. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
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Minimum Wage effects throughout the Wage distribution
Journal of Human Resources, 2004Co-Authors: David Neumark, Mark E Schweitzer, William WascherAbstract:This paper provides evidence on a wide set of margins along which labor markets can adjust in response to increases in the Minimum Wage, including Wages, hours, employment, and ultimately labor income. Not surprisingly, the evidence indicates that low-Wage workers are most strongly affected, while higher-Wage workers are little affected. Workers who initially earn near the Minimum Wage experience Wage gains. Nevertheless, their hours and employment decline, and the combined effect of these changes on earned income suggests adverse consequences, on net, for low-Wage workers.
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employment effects of Minimum and subMinimum Wages panel data on state Minimum Wage laws
Industrial and Labor Relations Review, 1992Co-Authors: David Neumark, William WascherAbstract:Using panel data on state Minimum Wage laws and economic conditions for the years 1973-89, the authors reevaluate existing evidence on the effects of a Minimum Wage on employment. Their estimates indicate that a 10% increase in the Minimum Wage causes a decline of 1-2% in employment among teenagers and a decline of 1.5-2% in employment for young adults, similar to the ranges suggested by earlier time-series studies. The authors also find evidence that youth subMinimum Wage provisions enacted by state legislatures moderate the disemployment effects of Minimum Wages on teenagers.
William Wascher - One of the best experts on this subject based on the ideXlab platform.
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Minimum Wage effects throughout the Wage distribution
Journal of Human Resources, 2004Co-Authors: David Neumark, Mark E Schweitzer, William WascherAbstract:This paper provides evidence on a wide set of margins along which labor markets can adjust in response to increases in the Minimum Wage, including Wages, hours, employment, and ultimately labor income. Not surprisingly, the evidence indicates that low-Wage workers are most strongly affected, while higher-Wage workers are little affected. Workers who initially earn near the Minimum Wage experience Wage gains. Nevertheless, their hours and employment decline, and the combined effect of these changes on earned income suggests adverse consequences, on net, for low-Wage workers.
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employment effects of Minimum and subMinimum Wages panel data on state Minimum Wage laws
Industrial and Labor Relations Review, 1992Co-Authors: David Neumark, William WascherAbstract:Using panel data on state Minimum Wage laws and economic conditions for the years 1973-89, the authors reevaluate existing evidence on the effects of a Minimum Wage on employment. Their estimates indicate that a 10% increase in the Minimum Wage causes a decline of 1-2% in employment among teenagers and a decline of 1.5-2% in employment for young adults, similar to the ranges suggested by earlier time-series studies. The authors also find evidence that youth subMinimum Wage provisions enacted by state legislatures moderate the disemployment effects of Minimum Wages on teenagers.
Daniel Aaronson - One of the best experts on this subject based on the ideXlab platform.
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industry dynamics and the Minimum Wage a putty clay approach
International Economic Review, 2018Co-Authors: Daniel Aaronson, Eric French, Isaac SorkinAbstract:We document two new findings about the industry‐level response to Minimum Wage hikes. First, restaurant exit and entry both rise following a hike. Second, there is no change in employment among continuing restaurants. We develop a model of industry dynamics based on putty‐clay technology that is consistent with these findings. In the model, continuing restaurants cannot change employment, and thus industry‐level adjustment occurs gradually through exit of labor‐intensive restaurants and entry of capital‐intensive restaurants. Interestingly, the putty‐clay model matches the small estimated short‐run disemployment effect of the Minimum Wage found in other studies, but produces a larger long‐run disemployment effect.
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the spending and debt response to Minimum Wage hikes
The American Economic Review, 2012Co-Authors: Daniel Aaronson, Sumit Agarwal, Eric FrenchAbstract:Abstract Immediately following a Minimum Wage hike, household income rises on average by about $250 per quarter and spending by roughly $700 per quarter for households with Minimum Wage workers. Most of the spending response is caused by a small number of households who purchase vehicles. Furthermore, we find that the high spending levels are financed through increases in collateralized debt. Our results are consistent with a model where households can borrow against durables and face costs of adjusting their durables stock. (JEL D12, D14, D91, J38)
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the Minimum Wage restaurant prices and labor market structure
Journal of Human Resources, 2008Co-Authors: Daniel Aaronson, Eric French, James M MacdonaldAbstract:Using store-level and aggregated Consumer Price Index data, we show that restaurant prices rise in response to Minimum Wage increases under several sources of identifying variation. We introduce a general model of employment determination that implies Minimum Wage hikes cause prices to rise in competitive labor markets but potentially fall in monopsonistic environments. Furthermore, the model implies employment and prices are always negatively related. Therefore, our empirical results provide evidence against the importance of monopsony power for understanding small observed employment responses to Minimum Wage changes. Our estimated price responses challenge other explanations of the small employment response, too.
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the spending and debt response to Minimum Wage hikes
Social Science Research Network, 2008Co-Authors: Daniel Aaronson, Sumit Agarwal, Eric FrenchAbstract:Following a Minimum Wage hike, household income rises on average by about $250 per quarter and spending by roughly $700 per quarter for households with Minimum Wage workers. Most of the spending response is caused by a small number of households who purchase vehicles. Furthermore, we find that the high spending levels are financed through increases in collateralized debt. Our results are consistent with a model where households can borrow against durables and face costs of adjusting their durables stock.
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price pass through and the Minimum Wage
The Review of Economics and Statistics, 2001Co-Authors: Daniel AaronsonAbstract:This paper tests a textbook consequence of competitive markets: that an industry-wide increase in the price of labor is passed on to consumers through an increase in prices. Using several data sources on restaurant prices, I explore the price impact of Minimum-Wage hikes in Canada and the United States. Particular attention is paid to the timing of these price responses to gauge the ‘stickiness’ of Minimum-Wage cost shocks. I find that restaurant prices generally rise with changes in the Wage bill and that this response is concentrated in the quarter surrounding the month during which the legislation is enacted.
Mirco Tonin - One of the best experts on this subject based on the ideXlab platform.
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Minimum Wage and tax evasion theory and evidence
Journal of Public Economics, 2011Co-Authors: Mirco ToninAbstract:The paper investigates the role of the Minimum Wage in a competitive economy in which there is underreporting of earnings by employed labour. The Minimum Wage induces higher compliance by some lowproductivity workers and transforms a nominally neutral …scal system into a regressive one. A spike in the Wage distribution at the Minimum Wage level appears and a positive correlation between the size of the spike and the size of the informal economy is predicted and documented using cross-country data for Europe. A further result is that employees whose o¢ cially declared earnings appear to be boosted by a Minimum Wage hike actually experience a decline in their true income. This prediction …nds support in an empirical test using the massive increase in the Minimum Wage that took place in Hungary in 2001 as a quasi-natural experiment.
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Minimum Wage and tax evasion theory and evidence
Research Papers in Economics, 2007Co-Authors: Mirco ToninAbstract:This paper examines the interaction between Minimum Wage legislation and tax evasion by employed labor. I develop a model in which firms and workers may agree to report less than the true amount of earnings to the fiscal authorities. I show that introducing a Minimum Wage creates a spike in the distribution of declared earnings and induces higher compliance by some agents, thus reducing their disposable income. The comparison of food consumption and of the consumption-income gap before and after the massive Minimum Wage hike that took place in Hungary in 2001 reveals that households who appeared to benefit from the hike actually experienced a drop compared to similar but unaffected households, thus supporting the prediction of the theory.
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the effects of the Minimum Wage in an economy with tax evasion
Research Papers in Economics, 2006Co-Authors: Mirco ToninAbstract:A model of the labor market is built where imperfect detection in case of auditing induces underreporting of earnings. The introduction of the Minimum Wage makes some workers increase compliance, boosting fiscal revenues. A spike at the Minimum Wage level appears in the distribution of earnings. The model predicts a positive correlation between the size of the spike at the Minimum Wage level and the size of the informal economy. Empirical evidence supporting this prediction is presented.
Eric French - One of the best experts on this subject based on the ideXlab platform.
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industry dynamics and the Minimum Wage a putty clay approach
International Economic Review, 2018Co-Authors: Daniel Aaronson, Eric French, Isaac SorkinAbstract:We document two new findings about the industry‐level response to Minimum Wage hikes. First, restaurant exit and entry both rise following a hike. Second, there is no change in employment among continuing restaurants. We develop a model of industry dynamics based on putty‐clay technology that is consistent with these findings. In the model, continuing restaurants cannot change employment, and thus industry‐level adjustment occurs gradually through exit of labor‐intensive restaurants and entry of capital‐intensive restaurants. Interestingly, the putty‐clay model matches the small estimated short‐run disemployment effect of the Minimum Wage found in other studies, but produces a larger long‐run disemployment effect.
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the spending and debt response to Minimum Wage hikes
The American Economic Review, 2012Co-Authors: Daniel Aaronson, Sumit Agarwal, Eric FrenchAbstract:Abstract Immediately following a Minimum Wage hike, household income rises on average by about $250 per quarter and spending by roughly $700 per quarter for households with Minimum Wage workers. Most of the spending response is caused by a small number of households who purchase vehicles. Furthermore, we find that the high spending levels are financed through increases in collateralized debt. Our results are consistent with a model where households can borrow against durables and face costs of adjusting their durables stock. (JEL D12, D14, D91, J38)
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the Minimum Wage restaurant prices and labor market structure
Journal of Human Resources, 2008Co-Authors: Daniel Aaronson, Eric French, James M MacdonaldAbstract:Using store-level and aggregated Consumer Price Index data, we show that restaurant prices rise in response to Minimum Wage increases under several sources of identifying variation. We introduce a general model of employment determination that implies Minimum Wage hikes cause prices to rise in competitive labor markets but potentially fall in monopsonistic environments. Furthermore, the model implies employment and prices are always negatively related. Therefore, our empirical results provide evidence against the importance of monopsony power for understanding small observed employment responses to Minimum Wage changes. Our estimated price responses challenge other explanations of the small employment response, too.
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the spending and debt response to Minimum Wage hikes
Social Science Research Network, 2008Co-Authors: Daniel Aaronson, Sumit Agarwal, Eric FrenchAbstract:Following a Minimum Wage hike, household income rises on average by about $250 per quarter and spending by roughly $700 per quarter for households with Minimum Wage workers. Most of the spending response is caused by a small number of households who purchase vehicles. Furthermore, we find that the high spending levels are financed through increases in collateralized debt. Our results are consistent with a model where households can borrow against durables and face costs of adjusting their durables stock.