Association for Public Policy Analysis & Management

Previous work on the minimum wage has been centered on workers covered by the Fair Labor Standards Act, from which the federal minimum wage is derived. This body of research has largely ignored the portion of the labor market exempted from the minimum wage. The exempt labor market is a diverse set of employment arrangements. One of the most talked about subsets of the exempt labor market is the online gig economy, composed of workers from firms like Uber, Airbnb, and TaskRabbit. Beyond the online gig economy, the exempt labor market includes all independent contractors, the self-employed, spot-market workers, and other nonstandard work arrangements. These work arrangements exist in parallel to the nonexempt labor market. The absence of research on the impacts of the minimum wage on the exempt labor market has left researchers and policy makers under prepared to address issues related to the expansion of the exempt labor market, including the online gig economy. This paper attempts to fill in the gap through assessing if the minimum wage produces spillover effects on the exempt labor market, and if this effect varies between traditional exempt work and the online gig economy. To test this, I leverage both the Current Population Survey Contingent Worker Supplement (CWS) and Nonemployer Statistics (NES). I use these data sources in conjunction with data on state minimum wages over time and data on where and when Uber began operations within the United States. These data allow for tests on how the introduction of a homogeneous exempt labor market, Uber, interacts with variation in the minimum wage, and how this compares to more traditional exempt labor markets. Utilizing an interacted fixed effect difference-in-difference model the relationship between the minimum wage and a homogeneous exempt labor market is identified. Preliminary work utilizing the NES indicates that the minimum wage is positively related to the number of people working in the exempt labor market tied to Uber. This contrasts with the findings on the general exempt labor market where most sectors are found to be insignificantly related to the minimum wage. This result implies that as the minimum wage increases, exempt markets with low barriers of entry expand. The presence of spillover effects implies that previous estimates of the aggregate effect of minimum wage policies which failed to account for the exempt labor market may be biased, as they fail to factor in the potential for workers to seek employment in the exempt labor market.