Peter Orazem (ISU)

Event
Thursday, September 6, 2018 - 3:40 pm to 5:00 pm

Dr. Peter OrazemLocation: 360 Heady Hall

Description: Peter Orazem, University Professor, Iowa State University
"Long-Term Responses to Large Minimum Wage Shocks: Sub-Minimum and Super-Minimum Workers in Slovenia"

Abstract: This study examines the impact of a large minimum wage increase implemented in Slovenia in 2010 on high- and low-skill worker employment, unemployment, hours and earnings. We find that the minimum wage increase had a large and persistent negative effect on workers whose marginal revenue products are predicted to be below the minimum wage. The effect is largest for the least skilled and gets smaller as skill level rises. Workers whose co-workers received mandated pay increases experienced a boost in relative demand as firms substituted away from sub-minimum toward super-minimum workers. The adverse employment effect occurred both through a higher probability of transition from employment to non-employment and through a decreased probability of transition from non-employment to employment. The adverse minimum wage effect occurs for all low-skilled workers, whether experienced or first-time market entrants. Although sub-minimum workers who remain employed received large earnings increases, the sub-minimum workers as a group lost average earnings, hours and employment compared to workers whose estimated marginal revenue products were immediately above threshold.

Contact Person: John Winters

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