Minimum Wage Increases by Ballot Initiative: Effect on Restaurant Employment and Earnings

Fourteen states increased their minimum wages by law or by ballot at the start of 2020. In a perfectly competitive labor market, price floors like the minimum wage generate unemployment, but empirical evidence suggests a mixed effect, finding often that minimum wage increases have no significant effect on employment. One explanation for this disconnect could be that legislators avoid unemployment by raising minimum wages at times when the labor market is unlikely to respond with more unemployment. This paper examines this explanation by studying minimum wage increases by ballot initiative, a process that avoids any legislative input. Using a difference-in-differences research design on a 20% increase in the minimum wage in Maine by ballot in 2016, this paper finds that the increase had no significant effect on restaurant industry employment or earnings. These results suggest that minimum wage increases passed by ballot may be inferior to those passed by state legislatures, which similarly tend not to cut employment but generate significant increases in earnings for workers. (JEL Classification Codes: J30, J33, J38)

Author

• Kotak, Parth

Language

• English

Keyword

• Minimum wage
• Employment
• Unemployment
• Labor market

Date created

• 2021

Type of Work

• Article

License

• All rights reserved

Rights statement

• In Copyright

GW Unit

• Student Organization

Persistent URL

•  https://scholarspace.library.gwu.edu/work/1r66j1947

In Collection:

• The Capitol Economics Journal

Thumbnail	Title	Date Uploaded	Visibility	Actions
	MINIMUM_WAGE_INCREASES_BY_BALLOT_INITIATIVE.pdf	2022-08-31	Open Access	Press to Select an action Download View in Browser