Reassessing the Employment Effect of Minimum Wages : Heterogeneity Across Industries

In recent decades, the level and growth rate of minimum wages have risen markedly in many advanced countries, which, in turn, raises concerns about potential adverse impacts on employment. This study reassesses the employment effect of minimum wage hikes by exploitingindustry-level heterogeneity in the bindingness of minimum wages. Our analysis, employingtwo-stage least squares (2SLS) estimation with country-industry panel data, highlights thatminimum wage hikes can lead to a decline in employment, an effect that tends to be larger inindustries with a higher minimum-to-mean wage ratio. The findings may have important implications for recent discussions on the adoption of differential minimum wages across industries - differential minimum wages across industries based on the minimum-to-mean wage ratio wouldhave smaller disemployment effects than uniform minimum wages