The Minimum Wage, Turnover, and the Shape of the Wage Distribution

Abstract

This paper proposes an empirical approach for jointly modelling the impact of the minimum wage on the wage distribution, and on movements in and out of the workforce. We estimate the effects of the minimum wage on the hazard rate for wages, which provides a convenient way of re-scaling the wage distribution in the presence of employment effects linked to the minimum wage. We use the estimates to decompose the distributional effects of minimum wages into effects for workers moving out of employment, workers moving into employment, and workers continuing in employment. We find significant differences across the three groups. 1