Journal of Labor Research

, Volume 30, Issue 1, pp 75–97 | Cite as

The Effects of Minimum Wage Increases on Retail Employment and Hours: New Evidence from Monthly CPS Data



Proponents of state and federal minimum wage increases argue that past minimum wage hikes have not adversely affected retail employment. However, the existing empirical evidence is mixed. This study uses monthly data from the 1979–2004 Current Population Survey to provide new estimates of the effect of minimum wage increases on retail employment and hours worked. The findings suggest evidence of modest adverse effects. A 10% increase in the minimum wage is associated with a 1% decline in retail trade employment and usual weekly hours worked. Larger negative employment and hours effects are observed for the least experienced workers in the retail sector. These results are robust across a number of specifications, but are sensitive to controls for state time trends.


Minimum wage Employment Retail trade 


  1. Baker M, Benjamin D, Stanger S (1999) The highs and lows of the minimum wage effect: a time-series cross-section study of the Canadian law. J Labor Econ 17(2):318–350CrossRefGoogle Scholar
  2. Bernstein J (2004) Minimum wage and its effects on small businesses (April 29). Testimony: House Subcommittee on Workforce Empowerment and Government Programs.
  3. Burkhauser RV, Sabia JJ (2007) The effectiveness of minimum wage increases in reducing poverty: past, present, and future. Contemp Econ Policy 25(2):262–281CrossRefGoogle Scholar
  4. Burkhauser RV, Couch KA, Wittenburg DC (2000a) A reassessment of the new economics of the minimum wage. J Labor Econ 18(4):653–681CrossRefGoogle Scholar
  5. Burkhauser RV, Couch KA, Wittenburg DC (2000b) Who minimum wage increases bite: an analysis using monthly data from the SIPP and CPS. South Econ J 67(1):16–40CrossRefGoogle Scholar
  6. Burkhauser RV, Couch KA, Glenn AJ (1996a) Public policies for the working poor: the earned income tax credit versus minimum wage legislation. In: Polachek SW (ed) Research in labor economics. vol. 15. JAI, Greenwich, CN, pp 65–109Google Scholar
  7. Burkhauser RV, Couch KA, Wittenburg DC (1996b) Who gets what’ from minimum wage hikes: a re-estimation of card and Krueger’s distributional analysis in myth and measurement: the New economics of the minimum wage. Ind Labor Relat Rev 49(3):547–552CrossRefGoogle Scholar
  8. California Senate Committee on Industrial and Labor Relations (CSCILR) (2006) Bill no. SB 1162.
  9. Card D (1992) Do minimum wages reduce employment? A case study of California 1987–1989. Ind Labor Relat Rev 46:22–37CrossRefGoogle Scholar
  10. Card D, Krueger AB (1994) Minimum wages and employment: a case study of the fast-food industry in New Jersey and Pennsylvania. Am Econ Rev 84:772–793Google Scholar
  11. Card D, Krueger AB (1995) Myth and measurement: the new economics of the minimum wage. Princeton University Press, Princeton, NJGoogle Scholar
  12. Card D, Katz L, Krueger A (1994) Comment on David Neumark and William Wascher, ‘Employment Effects of Minimum Wages and Subminimum Wages: Panel Data on State Minimum Wage Laws’. Ind Labor Relat Rev 48:487–496CrossRefGoogle Scholar
  13. Card D, Krueger AB (2000) Minimum wages and employment: a case study of the fast-food industry in New Jersey and Pennsylvania: reply. Am Econ Rev 90(5):1397–420Google Scholar
  14. Congressional Budget Office (CBO) (2007) Response to a request by Senator Grassley about the effects of increasing the federal minimum wage versus expanding the earned income tax credit. Available at:
  15. Conti JM (2004) Testimony of Judith M. Conti, D.C. Employment Justice Center, Committee on Public Services.
  16. Couch KA, Wittenburg DC (2001) The response of hours of work to increases in the minimum wage. South Econ J 68(1):171–177CrossRefGoogle Scholar
  17. Deere D, Murphy KM, Welch F (1995) Reexamining methods of estimating minimum wage effects: employment and the 1990–1991 minimum wage hike. Am Econ Assoc Pap Proc 85:232–237Google Scholar
  18. Fiscal Policies Institute (2004) State minimum wages and employment in small businesses. Available at:, Accessed June 10, 2007
  19. Fiscal Policies Institute (2006). States with minimum wages above the Federal level have had faster small business and retail job growth. Available at:, Accessed June 10, 2007.
  20. Hamermesh DS (1995) Review symposium: myth and measurement: the new economics of the minimum wage. Ind Labor Relat Rev 48:835–838CrossRefGoogle Scholar
  21. Hill S (2005) Testimony before the [Maryland] Senate Finance Committee on Senate Bill 59.
  22. Kaitz H (1970) Experience of the past: the national minimum, in youth employment and minimum wages. Bulletin no. 1657. US Department of Labor, Bureau of Labor Statistics, Washington, DC, pp 30–54Google Scholar
  23. Katz L, Krueger AB (1992) The Effect of the minimum wage on the fast food industry. Ind Labor Relat Rev 46:6–21CrossRefGoogle Scholar
  24. Kennedy T (2005) Senator Kennedy offers minimum wage act of 2005 (May).
  25. Kim T, Taylor LJ (1995) The employment effect in retail trade of California’s minimum wage increase. J Bus Econ Stat 13:175–182CrossRefGoogle Scholar
  26. Neumark D (2001) The employment effects of minimum wages: evidence from a prespecified research design. Ind Relat 40(1):121–144CrossRefGoogle Scholar
  27. Neumark D, Wascher W (1994) Employment effects of minimum and subminimum wages: reply to Card, Katz, and Krueger. Ind Labor Relat Rev 47:497–512 AprilCrossRefGoogle Scholar
  28. Neumark D, Wascher W (1995) The effect of New Jersey’s minimum wage increase on fast-food employment: a re-evaluation using payroll records. National Bureau of Economic Research Working Paper no. 5224Google Scholar
  29. Neumark D, Wascher W (2001) Using the EITC to help poor families: new evidence and a comparison with the minimum wage. Natl Tax J 54(3):281–317Google Scholar
  30. Neumark D, Wascher W (2002) Do minimum wages fight poverty? Econ Inq 40(3):315–333CrossRefGoogle Scholar
  31. Neumark D, Wascher W (2007) Minimum wages and employment. Found Trends Microecon 3(1–2):1–182Google Scholar
  32. Partridge M, Partridge J (1999) Do minimum wage hikes reduce employment? State-level evidence from the low-wage retail sector. J Labor Res 20(3):393–413CrossRefGoogle Scholar
  33. Policy Matters Ohio (2006) Good for business: small business growth and state minimum wages. Available at:, Accessed June 10, 2007
  34. Sabia JJ (2006) The effect of minimum wage increases on teenage, retail, and small business employment. Employment Policies Institute. Available at:, Accessed February 1, 2008
  35. Sabia JJ (2007) Identifying minimum wage effects in state panels: new evidence from the current population survey. Working Paper, American UniversityGoogle Scholar
  36. Sabia JJ (2008) Minimum wages and the economic wellbeing of single mothers. J Pol Anal Manage (forthcoming)Google Scholar
  37. Small Business Administration (1999) distribution of low wage workers by firm size in the United States. Available at:, Accessed June 10, 2007
  38. Welch FR (1995) Review Symposium: Myth and Measurement: The New Economics of the Minimum Wage. Ind Labor Relat Rev 48:842–849Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  1. 1.Department of Public Administration and Policy, School of Public AffairsAmerican UniversityWashingtonUSA

Personalised recommendations