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Economics Seminar Series – Martha Bailey, University of Michigan

The Economic Impact of a Very High National Minimum Wage: Evidence From the 1966 Amendments to the Fair Labor Standards Act

This paper provides new evidence on the implications of a very high national minimum wage in the United States. We examine the short and lagged economic effects of the 1966 Amendments to the Fair Labor Standards Act (FLSA) which increased the minimum wage to the highest level in U.S. history and extended coverage to an additional 9.1 million of the lowest paid workers. In order to use the 1960 Census and 1963 to 1980 March Current Population Survey (CPS) for this purpose, we develop a new methodology to correct for measurement error in hourly wage estimates.  Our research design is a dynamic extension of Card’s (1992) methodology that exploits state-level differences in the “bite” of a national minimum wage. Our results provide little evidence that employment or the intensity of work (weeks or hours worked) changed for men ages 16 to 64 following the 1966 Amendments. At the mean, a 50 percent increase in the share of affected workers leads to no more than a 0.07 percentage point decline in employment and no more than a 0.02 decline in the number of weeks worked. This finding holds in the shorter-run as well as in the longer-term. We do, however, find modest evidence that the composition of workers shifted. The employment of black men fell in the wake of the 1966 FLSA while it rose among white men.

March 28th, 2017

444 Fronczak Hall