Association for Public Policy Analysis & Management

Panel: Distributional and Long-Term Effects of Minimum Wages

(Poverty and Income Policy)

As states and localities have considered and in some cases enacted historically high minimum wages over the last several years, debates about the minimum wage have become increasingly tied to discussions of growing income inequality and stagnant wage growth. However, it is not clear from prior research that raising the minimum wage would lead to long-term gains for workers who are most exposed to those trends. Even if higher minimum wages increase the earnings of affected workers in the short run, subsequent changes in labor market dynamics could augment or reverse those initial gains over time.

This session provides evidence on how the effects of minimum wages changes vary across the earnings distribution, as well as evidence on how they persist over time. In sequence, the papers in this session estimate the initial effects of minimum wage changes on earnings, consider how they evolve as one looks further ahead in time, and investigate an important mediating mechanism between short- and long-run effects. Manoli and Patel use population-level administrative tax data to estimate effects of minimum wage changes on the distribution of earnings, tax filing, and labor market outcomes, taking advantage of differences in exposure to these policy changes across industries and earnings levels. Rinz and Voorheis link administrative earnings data to the Current Population Survey to consider how changes in minimum wages affect earnings growth up to five years later, looking across the earnings distribution and analyzing both changes in values of low percentiles of the earnings distribution and the earnings trajectories of individuals who begin at low percentiles. Totty and Zipperer link administrative earnings data to the Survey of Income and Program Participation to study how exposure to minimum wage increases early in one’s career affects earnings over the life cycle. Bailey, DiNardo, and Stuart evaluate the employment effects of the large minimum wage increase associated with the 1966 amendments to the Fair Labor Standards Act, providing insight into one potential mediating pathway between short- and long-term earnings effects. The setting considered in this paper is particularly relevant today, as many recently proposed minimum wage increases would reach levels that are high by historical standards.