Association for Public Policy Analysis & Management

This paper provides new evidence on the implications of a very high national minimum wage in the United States. We examine the short and longer-term economic effects of the 1966 Amendments to the Fair Labor Standards Act (FLSA) which increased the U.S. minimum wage to its highest real level of the 20th Century and extended coverage to an additional 9.1 million of the lowest paid workers. Our research design is a dynamic extension of Card’s (1992) methodology that exploits state-level differences in the “bite” of a national minimum wage due to regional differences in the standard-of-living. To ameliorate the effects of measurement error in implied hourly wages from the 1960 Census and 1963 to 1980 March Current Population Survey (CPS), we use the 20th percentile of the annual wage earnings distribution to proxy for exposure to the FLSA. Our results provide little evidence that employment or the intensity of work (weeks or hours worked) changed for men ages 16 to 64 following the 1966 Amendments. At the mean, we estimate that a 50 percent increase in the share of affected workers leads to a 0.2 percentage point (0.3 percent) decline in employment and a 0.1 week (0.3 percent) decline in the number of weeks worked. This finding holds in the shorter-run as well as in the 7 years after enactment. We do, however, find evidence of moderate negative employment effects among black men.