Redistribution through Minimum Wage Regulation: An Analysis of Program Linkages and Budgetary Spillovers
You may be able to download this chapter for free via the Document Object Identifier.
Program linkages and budgetary spillovers can significantly complicate efforts to project a policy change’s effects. I illustrate this point in the context of recent increases in the federal minimum wage. Previous analysis finds that these particular minimum wage increases had significant effects on employment. Employment declines were sufficiently large that the average earnings of targeted individuals declined. Payroll tax revenues thus also fell. I find that transfers to affected individuals through programs including unemployment insurance, food stamp benefits, and cash welfare assistance changed little. These programs thus offset relatively little of the earnings declines experienced by individuals who lost employment. I discuss how this broad range of spillovers matters for assessing the relevant minimum wage change’s welfare implications.
Special thanks to Jean Roth for greatly easing the navigation and analysis of SIPP data, as made accessible through NBER. Thanks also to Jeff Brown for detailed comments, Julie Cullen, Roger Gordon, and Rob Valetta for helpful conversations, and Michael Wither for invaluable research assistance. I thank the Stanford Institute for Economic Policy Research and the Federal Reserve Bank of San Francisco for their hospitality while working on this paper. I also gratefully acknowledge support from the UCSD Academic Senate through its small grant program.