The effects of minimum wages over the business cycle: the Great Recession

Abstract

PurposeThis paper examines disemployment effects of minimum wages during the period 2002–2010.Design/methodology/approachThe authors employ the discontinuity design.FindingsThe authors find that minimum wages had a significant negative impact on teen employment before the Great Recession. During the Great Recession, the disemployment effects of minimum wages were insignificant. The finding is consistent with the evolution of firms’ market power during the business cycle.Originality/valueThe authors attempt to reconcile the debate about the effects of minimum wages on US employment.