Tag: Arindrajit Dube

Must-read: Arindrajit Dube and Ben Zipperer: “Puerto Rico’s predicaments: Is its minimum wage the culprit?”

Posted on by Brad DeLong

Must-Read: Arindrajit Dube and Ben Zipperer: Puerto Rico’s predicaments: Is its minimum wage the culprit?: “The federal minimum wage–which has applied to Puerto Rico since 1983…

is much more binding there than it is on the mainland…. In 2014, for example, the federal minimum wage stood at 77 percent of the median hourly wage in Puerto Rico, compared to 42 percent in the United States…. Clearly, the Puerto Rico’s minimum wage exceeds the cautious rule-of-thumb of 50 percent of median wage of full-time workers suggested by one of us in previous work. But… the major problem with a minimum wage-centric explanation is timing. There has been no change in the relative minimum wage between Puerto Rico and the mainland over the past 32 years. And since the federal standard has not kept up with wage growth on the island, the bite of the minimum wage in Puerto Rico has eroded over this period….

In their 1992 paper, ‘When the Minimum Wage Really Bites: The Effect of the U.S. Level Minimum on Puerto Rico,’ economists Alida Castillo-Freeman… and Richard Freeman… found evidence of moderate-sized job losses by comparing unemployment trends over time, and by comparing wages and employment across industries on the island. Yet… Alan Krueger found that some of the findings by Castillo-Freeman and Freeman proved fragile… driven by the over-representation of many narrow manufacturing industries in their sample….

Professors Freeman and Krueger are in complete agreement today that it is unlikely either to be a major factor behind the current economic crisis, or an important part of the solution. Indeed, the long-run decline in the bite of the minimum wage presents a serious challenge for those arguing otherwise, since the timing of the crisis is inconsistent with minimum wage having played a real role in it…

Must-Read: Sylvia Allegretto, Arindrajit Dube, Michael Reich and Ben Zipperer: Credible Research Designs for Minimum Wage Studies: A Response to Neumark, Salas and Wascher

Posted on by Brad DeLong

Must-Read: At this stage, Neumark, Salas, and Wascher’s are only hurting themselves–and hurting confidence not just in their minimum-wage work but their non-minimum wage work as well–by their refusal to acknowledge that the overwhelming weight of the evidence is that Card and Krueger were right: that increases in the minimum wage from levels currently present in the United States have at most very small disemployment effects.

Sylvia Allegretto, Arindrajit Dube, Michael Reich and Ben Zipperer: Credible Research Designs for Minimum Wage Studies: A Response to Neumark, Salas and Wascher: “We assess the Neumark, Salas and Wascher (NSW) critique of our minimum wage findings…

…Recent studies, including one by NSW, obtain small employment elasticities for restaurants, -0.06 or less in magnitude. The substantive critique in NSW thus centers primarily upon teens. Using a longer (1979-2014) sample than used by NSW and in our own previous work, we find clear evidence that teen minimum-wage employment elasticities from a two-way fixed-effects panel model are contaminated by negative pre-existing trends. Simply including state-specific linear trends produces small and statistically insignificant estimates (around -0.07); including division-period effects further reduces the estimated magnitudes toward zero. A LASSO-based selection procedure indicates these controls for time-varying heterogeneity are warranted. Including higher order state trends does not alter these findings, contrary to NSW. Consistent with bias in the fixed-effects estimates from time-varying heterogeneity, first-difference estimates are small or positive. Small, statistically insignificant, teen employment elasticities (around -0.06) obtain from border discontinuity design with contiguous counties. Contrary to NSW, such counties are more similar to each other than to other counties. Synthetic control studies also indicate small minimum wage elasticities (around -0.04). Nearby states receive significantly more weight in creating synthetic controls, providing further support for using regional controls. Finally, NSW’s preferred new matching estimates are plagued by a problematic sample that mixes treatment and control units, obtains poor matches, and shows the largest employment drops in areas with relative minimum wage declines.