Russel Sage Foundation

In his State of the Union address, President Obama voiced support for raising the federal minimum wage, a deeply controversial move that has often divided economists and policymakers. Conventional economic theory suggests that raising the minimum wage will lead firms to cut production costs and jobs. Over the past decade or so, the Russell Sage Foundation has funded several studies that assessed the actual impact of minimum wage increases in cities and states across the country. Links are included below:

• Schmitt, John and David Rosnick. 2011. "The Wage and Employment Impact of Minimum‐Wage Laws in Three Cities," Center for Economic Policy and Research.

This report analyzes the wage and employment effects of the first three city-specific minimum wages in the United States –San Francisco (2004), Santa Fe (2004), and Washington, DC (1993). The authors use data from a virtual census of employment in each of the three cities, surrounding suburbs, and nearby metropolitan areas, to estimate the impact of minimum-wage laws on wages and employment in fast food restaurants, food services, retail trade, and other low-wage and small establishments.

• Powers, Elizabeth T. 2009. "The Impact of Minimum-Wage Increases: Evidence from Fast-Food Establishments in Illinois and Indiana," Journal of Labor Research Vol. 30 (4), pp. 365-394. (Gated)

Fast-food establishments in Illinois and Indiana were surveyed during a period of state-mandated minimum-wage increases in Illinois. While entry-level wages of Illinois establishments rose substantially in response to the mandated increases, there is little evidence that Illinois establishments ameliorated wage increases by delaying scheduled raises or reducing fringe benefit offerings. There is little evidence of ‘labor-labor’ substitution in favor of women, better educated, or teenaged workers, or increased worker tenure at the new wage, but weak evidence of increased food prices. In contrast, there are large declines in part-time positions and workers’ hours in Illinois relative to Indiana. Aggregate figures from the Bureau of Labor Statistics support relative declines in total fast-food employment in ‘downstate’ Illinois counties, as hypothesized. However, establishments’ responses do not appear proportionate to the strength of the minimum wage change.

• Dube, Arindrajit, Suresh Naidu, and Michael Reich. 2007. "The Economic Impacts of a Citywide Minimum Wage," Working Paper.

This paper presents the first study of the economic effects of a citywide minimum wage—San Francisco’s adoption of a minimum wage, set at $8.50 in 2004 and $9.14 by 2007. Compared to earlier benchmark studies by Card and Krueger and by Neumark and Wascher, this study surveys table-service as well as fast-food restaurants, includes more control groups, and collects data for more outcomes. The authors find that the policy increased worker pay and compressed wage inequality, but did not create any detectable employment loss among affected restaurants. The authors also find smaller amounts of measurement error than characterized the earlier studies, and so they can reject previous negative employment estimates with greater confidence. Fastfood and table-service restaurants responded differently to the policy, with a small price increase and substantial increases in job tenure and in the proportion of full-time workers among fast-food restaurants, but not among table-service restaurants.