Income Security Policy Paper No. 14

Who Minimum Wage Increases Bite: An Analysis Using Monthly Data from the SIPP and CPS

Richard V. Burkhauser, Kenneth A. Couch, and David C. Wittenburg

January 1997 

Abstract:  In this paper we use an estimating equation from the research of leading proponents of the view that minimum wage increases do not cause employment losses. Rather than using annual data from the May Current Population Survey (CPS), we test this hypothesis using monthly data from both the Survey of Income and Program Participation (SIPP) and the CPS. We find the traditional result that neoclassical theory would predict: minimum wage increases create employment losses that are concentrated among less valued workers. Minimum wage increases have an insignificant effect on the employment of prime age workers (aged 25 to 61), but they have large and significant negative employment effects on teenagers, young high school dropouts, and young blacks. Hence, the very people minimum wage policies claim to help are most likely to be adversely affected.


 

A revised version of this paper appears as "Who Minimum Wage Increases Bite:  Results from the Current Population Survey and Survey of Income and Program Participation," Southern Economics Journal, 67(1)(2000): 16-40.  Those interested in this topic should consult that version.