Minimum Wages and Employment Composition
Early Career Research Award
Although minimum wages mechanically increase the hourly pay of low-wage workers, such workers may not benefit if employers cut hours or employment. The tension between the objectives and the theoretical predictions of minimum wage policies has inspired a large literature examining whether higher minimum wages actually lead firms to reduce the overall number of low-wage workers they employ or substitute towards other factors of production.
There is less research on how minimum wages affect scheduling practices and which workers firms employ. For example, increases in the minimum wage reduce the relative cost of high-wage employees, which may lead employers to shift towards higher-wage occupations. Moreover, within a given low-wage occupation, new hires are likely to receive the largest wage gains. Accordingly, employers may allocate hours to more experienced or skilled workers. These compositional effects are largely unexplored by previous research and represent an important way in which minimum wage laws may benefit some workers at the expense of others.
This project provides some of the first empirical evidence on how minimum wage reforms change firms’ occupational composition and scheduling practices by leveraging daily, shift-level data on each employee’s occupation, employment arrangement (contract, wage, or salary), and hours worked in all US nursing homes. These administrative data allow us to observe how individual hours, overtime, and occupational roles change after increases in the minimum wage. Our results therefore broaden our understanding of how low-wage labor markets interact with government policy and can help policymakers design minimum wage reforms that best achieve their objectives.