When a city like Seattle raises the minimum wage to 15/hr, how does it affect the labor market in adjacent cities?

Are there examples, studies or accepted practices to address: Difficulty staffing entry level positions when labor pool can work across the street for several dollars/hr more?

  • $\begingroup$ I am intriguing the lack of common sense of such question like many other economy question : i) jobs are not infinite ii) Jobs are acquisition are not simple as e-commerce price comparison. $\endgroup$ – mootmoot Jan 13 '17 at 9:38
  • $\begingroup$ I do not disagree. Unfortunately, policy is not made on the logic of common sense. When you're attempting to convince a company to raise their wages, causal data evidencing your position is the most difficult argument to counter. $\endgroup$ – Jordan Walls Jan 20 '17 at 0:06

You should look at this county pairing methodology used by Dube, Lester and Reich (2010). http://escholarship.org/uc/item/86w5m90m

The abstract:

We use policy discontinuities at state borders to identify the effects of minimum wages on earnings and employment in restaurants and other low-wage sectors. Our approach generalizes the case study method by considering all local differences in minimum wage policies between 1990 and 2006. We compare all contiguous county pairs in the U.S. that straddle a state border and find no adverse employment effects. We show that traditional approaches that do not account for local economic conditions tend to produce spurious negative effects due to spatial heterogeneities in employment trends that are unrelated to minimum wage changes.

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    $\begingroup$ again, all the papers using geographical differences to identify effects of minimum wages rest on the assumption that minimum wages did only affect the place where minimum wages went up. If you want to learn about spillover effects, they do not help you. $\endgroup$ – Tobias Jan 12 '17 at 19:27

A very famous study in this direction is Card and Krueger (1994). They look an increase in the minimum wage in New Jersey in 1992. While New Jersey raised the minimum wage from USD 4.25/h to USD 5.05/h, the minimum wages remained at $4.25 in adjacent Pennsylvania.

You should have a look at the subsequent research.

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  • $\begingroup$ Most excellent! Thank you for the direction. $\endgroup$ – Jordan Walls Jan 6 '17 at 19:21
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    $\begingroup$ It should be pointed out that the model Card and Krueger use to identify the effects of minimum wages assumes that Minimum Wages do not affect adjacent labor markets. So while the paper goes in this direction it cannot really answer the question asked here. $\endgroup$ – Tobias Jan 7 '17 at 17:04
  • $\begingroup$ Jobs, are not amazon goods that go through delivery service chains. $\endgroup$ – mootmoot Jan 13 '17 at 9:44

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