Essays in Labour Economics: Evidence from Voluntary and Mandatory Wage Floors in the United States and New Zealand

Abstract

This thesis expands the literature on minimum and living wages by investigating local minimum wage ordinances and voluntary living wage programs. This thesis is presented as three distinct papers; the first explores a county-wide minimum wage ordinance in New Mexico, USA, while papers 2 and 3 explore New Zealand’s voluntary living wage program. In the United States, local minimum wage ordinances are growing in popularity, and research is emerging on their effects. Setting minimum wages at the local level is politically easier than enacting Federal legislation, and local minimum wages may be better targeted to local economic conditions. In my first chapter, “Local Minimum Wage Laws and Labour Market Outcomes: Evidence from New Mexico,” I use fixed effects and synthetic control analysis to uncover the effects of a local minimum wage law on the Albuquerque/Bernalillo region of New Mexico, with a focus on how provisions exempting tipped workers affect gains in earnings. My findings reveal that these provisions can lead to reductions in hourly wages for workers exempted from the minimum wage even when the labour market is not harmed overall. I find that the minimum wage ordinance did not reduce teen employment but that it served to increase the supply of teen labour leading to an increase in the teen unemployment rate. The second and third papers in this thesis address the voluntary living wage program in New Zealand. In the first quantitative work on New Zealand’s living wage, I utilize data from Statistics New Zealand’s Integrated Data Infrastructure (IDI) to explore several facets of the living wage experience for employers and employees. In the second paper, “The New Zealand Living Wage: Earnings, Labour Costs and Turnover,” I investigate the characteristics of New Zealand living wage firms and use fixed effects to examine the impact of living wage certification on employment, worker earnings and turnover. My results provide some evidence for increases in labour costs and worker earnings following certification but find that this change is driven by changes in small firms that employ few workers. I find no evidence of a reduction in turnover. In my final chapter, “Who Benefits from Living Wage Certification?” I investigate the distribution of benefits from the living wage based on an employees’ pre-treatment earnings, time of hire and whether or not they remained employed with the living wage firm. To do this, I utilize a worker-level panel dataset containing the full earnings history of all workers that were employed for a living wage or matched control firm between January 2014 and December 2015. I use fixed effects models containing fixed effects for worker, firm and month to compare patterns of earnings growth for workers hired before certification (‘pre-hires’) with those hired after certification (‘joiners’) and those who left their living wage job but remained in the workforce (‘leavers’). I also estimate the impact of living wage employment on the earnings of low-income workers. I find that the financial benefit of the living wage accrues almost exclusively to workers hired after certification and to low income workers. In addition, my analysis on the worker-level panel suggests that overall earnings growth in living wage firms lagged that in control firms over the observation period. This result is driven by relative declines in earnings for living wage workers in large firms and is attributed to increases in the published living wage rate that lags behind wage growth in the relevant segments of the job market.