Job Market Paper

To describe the employment effects of the minimum wage, researchers currently rely on the assumption that there is a singular effective minimum wage rate within a state or city. In practice, the federal Fair Labor Standards Act and state level policy suggest a vector of possible minimum wages that may be paid to a class of worker based on special characteristics such as firm headcount, firm revenue, visa status, age, or disability status. I introduce a framework to research the effects of a vector of minimum wage tiers on employment, using the stacked differences estimator used by Cengiz, Dube, Lindner, and Zipperer. I add to this estimator by introducing a share of workers allowed to be paid at the subminimum rate. There is still no unemployment effect associated with an increase in the headline minimum wage, but there are mixed results from the subminimum. The sign of the effects for the subminimum are more sensitive to specification than the headline wage, but both effects are on the same order of magnitude.

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