Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data

Traditional estimates that often find minimum wage disemployment effects include controls for state unemployment rates and state‐ and year‐fixed effects. Using CPS data on teens for the period 1990–2009, we show that such estimates fail to account for heterogeneous employment patterns that are correlated with selectivity among states with minimum wages. As a result, the estimates are often biased and not robust to the source of identifying variation. Including controls for long‐term growth differences among states and for heterogeneous economic shocks renders the employment and hours elasticities indistinguishable from zero and rules out any but very small disemployment effects. Dynamic evidence further shows the nature of bias in traditional estimates, and it also rules out all but very small negative long‐run effects. In addition, we do not find evidence that employment effects vary in different parts of the business cycle. We also consider predictable versus unpredictable changes in the minimum wage by looking at the effects of state indexation of the minimum wage.     

Living Wage Policies at the San Francisco Airport: Impacts on Workers and Businesses

This paper evaluates the costs, benefits and related impacts of living wage policies implemented at the San Francisco Airport (SFO). Unlike other living wage ordinances, the policies at SFO cover a large proportion of the low-wage labor force in a distinct labor market. The authors find that about 73 percent of the ground-based non-managerial workers at SFO received substantial wage increases as a direct or indirect result of the policies; the proportion of these workers earning under $10 per hour fell from 55 percent to 5 percent, significantly reducing earnings inequality. Other benefits to workers included enhanced health benefits and an arrest of declines in quality of life indices. The costs of the policies to employers amounted to an average of 0.7 percent of fare revenue, or $1.42 per airline passenger. We observe a series of dynamic adjustments that reduced those costs, including dramatically reduced turnover, improved worker morale and greater work effort. We find some limited evidence of worker-worker substitution, but no evidence of employment decline.     

EASTERN PROBLEMS AND WESTERN SOLUTIONS

A Review of O. Blanchard, R. Dornbusch, P. Krugman, R. Layard and L. Summers, Reform in Eastern Europe
G. Sinn and H.-W. Sinn, Jumpstart: The Economic UniJication of Germany
J. M. Kovács and M. Tardos (Ed.), Reform and Transformation in Eastern Europe: Soviet-type Economics on the Threshold of Change
R. Layard, 0. Blanchard, R. Dornbusch and P. Krugman, East-West Migration: The Alternatives     

Income Inequality: An Inter-Industry Analysis

This paper offers new evidence that inter-industry inequality has increased since the early seventies. An examination of de industrialization, segmented labor market, and international competition explanations of this increase shows that the growth of inequality is accounted for mainly by growing wage differentials among industries, notably between primacy and secondary sectors. Employment shifts out of middle-wage industries and employment and wage effects of international trade do not explain the inequality increase.