Minimum Wage Employment Effects and Labor Market Concentration
Azar, José,
Emiliano Huet-Vaughn,
Ioana Marinescu,
Bledi Taska and
Till von Wachter
No 14239, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Abstract:
Why is the employment effect of the minimum wage frequently found to be close to zero? Theory tells us that when wages are below marginal productivity, as with monopsony, employers are able to increase wages without laying off workers, but systematic evidence directly supporting this explanation is lacking. In this paper, we provide empirical support for the monopsony explanation by studying a key low-wage retail sector and using data on labor market concentration that covers the entirety of the United States with fine spatial variation at the occupation-level. We find that more concentrated labor markets - where wages are more likely to be below marginal productivity - experience significantly more positive employment effects from the minimum wage. While increases in the minimum wage are found to significantly decrease employment of workers in low concentration markets, minimum wage-induced employment changes become less negative as labor concentration increases, and are even estimated to be positive in the most highly concentrated markets. Our findings provide direct empirical evidence supporting the monopsony model as an explanation for the near-zero minimum wage employment effect documented in prior work. They suggest the aggregate minimum wage employment effects estimated thus far in the literature may mask heterogeneity across different levels of labor market concentration.
Keywords: Minimum wage; Monopsony; Oligopsony; Labor markets (search for similar items in EconPapers)
JEL-codes: J08 J23 J42 J80 (search for similar items in EconPapers)
Date: 2019-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47)
Downloads: (external link)
https://cepr.org/publications/DP14239 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
Related works:
Journal Article: Minimum Wage Employment Effects and Labour Market Concentration (2024)
Working Paper: Minimum Wage Employment Effects and Labor Market Concentration (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:14239
Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP14239
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().