Who Benefits from a Minimum Wage Increase?

The authors address the question of how a minimum wage increase affects the wages of low-wage workers relative to the wage the worker would have if there had been no minimum wage increase. The authors’ method allows for the effect to depend not only on the initial wage of the worker but also nonlinearly on the size of the minimum wage increase. Results indicate that low-wage workers who experience a small increase in the minimum wage tend to have lower wage growth than if there had been no minimum wage increase. A large increase to the minimum wage not only increases the wages of those workers who previously earned less than the new minimum wage but also spills over to workers with moderately higher wages. Finally, the authors find little evidence of heterogeneity in the effect by age, gender, income, and race.