The Employment and Distributional Effects of Minimum Wage Increases: A Case Study of the State of New York

Richard V. Burkhauser, Cornell University

Using data drawn from the Current Population Survey outgoing rotation groups, we estimate the employment effects of the 2004-2006 New York State minimum wage increase, and use these estimates to simulate the employment and distributional consequences of a newly proposed state minimum wage hike. Difference-in-difference-in-difference estimates show that the last state minimum wage hike from $5.15 to $6.75 per hour reduced employment among 16-to-29 year-olds without a high school degree by approximately 26 percent, an implied elasticity of -0.8. This result is robust to a wide set of cross-state and within-state control groups and is further bolstered by results from falsification tests in the periods just before and after the minimum wage was increased. When we use our estimated employment elasticities to simulate the distributional consequences of the proposed state minimum wage hike from $7.15 to $8.25, we find that just 20 percent of the benefits will be received by workers in poor households.