American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Raising the Bar: Minimum Wages and Employers' Hiring Standards
American Economic Journal: Economic Policy
vol. 14,
no. 2, May 2022
(pp. 91–124)
Abstract
Many scholars have studied the employment effects of minimum wages, but little is known about effects on the composition of hires. I investigate whether Germany's minimum wage introduction raised hiring standards, using worker fixed effects as a proxy for worker productivity. For the least productive workers hired, the minimum wage led to a 4 percentile point shift in the productivity distribution. This increase is missed using standard observable measures of worker productivity. The effects are larger with greater pre-reform screening intensity—indicating an employer response. This more selective hiring compensates about two-thirds of higher wage costs for the least productive hires.Citation
Butschek, Sebastian. 2022. "Raising the Bar: Minimum Wages and Employers' Hiring Standards." American Economic Journal: Economic Policy, 14 (2): 91–124. DOI: 10.1257/pol.20190534Additional Materials
JEL Classification
- J23 Labor Demand
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
- J38 Wages, Compensation, and Labor Costs: Public Policy
- M51 Personnel Economics: Firm Employment Decisions; Promotions
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