We infer the employment response to a minimum wage change by calibrating a model of employment for the restaurant industry. Whereas perfect competition implies that employment falls and prices rise after a minimum wage increase, the monopsony model potentially implies the opposite. We show that estimated price responses are consistent with the competitive model. We place fairly tight bounds on the employment response, with the most plausible parameter values suggesting that a 10% increase in the minimum wage lowers low‐skill employment by 2%–4% and total restaurant employment by 1%–3%.
Authors
CPP Co-Director
Eric is the Montague Burton Professor of Industrial Relations and Labour Economics at the University of Cambridge and Professor of Economics at UCL.
Daniel Aaronson
Journal article details
- DOI
- 10.1086/508734
- Publisher
- The University of Chicago Press Journals
- Issue
- Volume 25, No. 1, January 2007, pages 167-200
Suggested citation
Aaronson, D and French, E. (2007). 'Product market evidence on the employment effects of the minimum wage' 25, No. 1(2007), pp.167–200.
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