NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Who Pays for and Who Benefits from Minimum Wage Increases? Evidence from Israeli Tax Data on Business Owners and Workers

Lev Drucker, Katya Mazirov, David Neumark

NBER Working Paper No. 26571
Issued in December 2019
NBER Program(s):Labor Studies Program, Public Economics Program

A key goal of a higher minimum wage is income redistribution towards low-income families. Existing research on the minimum wage focuses on the impact on affected workers, but is silent on the incomes of the owners of businesses who pay for a higher minimum wage. Higher minimum wages will do more to redistribute income if the owners of businesses who pay the higher minimum are at the top of the income distribution, and conversely if minimum wage employers hare relatively low incomes, the redistributional effects are weakened. We study evidence on this question using a unique administrative dataset on the universe of tax records for Israel, in the period surrounding a large minimum wage increase. We find that the minimum wage hike reduced profits of companies, with minimum-wage intensive companies bearing the bulk of the cost and adjusting their workforces more aggressively, and profits declining more for lower-income business owners. Moreover, owners of businesses with higher shares of minimum-wage workers ranked at the bottom of the income distribution of business owners, and their incomes were comparable to those of mid-to-high level workers. In most cases, spouses of business owners earn less than the owners while spouses of minimum-wage workers earn more, further reducing the redistributive effect of the minimum wage increase.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w26571

 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us