The Employment and Distributional Impacts of Nationwide Minimum Wage Changes

Abstract

We assess the impact of nationwide minimum wages on employment throughout the whole wage distribution by exploiting geographical variation in the level of wages. We find a substantial increase in wages at the bottom of the wage distribution, while we detect a small, statistically insignificant negative effect on employment. Combining the estimated change in the wage distribution with a tax and benefit micro-simulation model, we show that the minimum wage generates considerable proportional income gains up to the middle of the household income distribution.