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
(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