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  5. Price Floors and Employer Preferences: Evidence from a Minimum Wage Experiment

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Price Floors and Employer Preferences: Evidence from a Minimum Wage Experiment

  • John J. Horton
American Economic Review (Forthcoming)

Abstract

Minimum hourly wages were randomly imposed on firms posting job openings in an online labor market. A higher minimum wage raised the wages of hired workers substantially. However, there was some reduction in hiring and large reductions in hours-worked. Treated firms hired more productive workers, which can explain, in part, the reduction in hours-worked: with more productive workers, projects were completed in less time. At the conclusion of the experiment, the platform imposed a market-wide minimum wage. A difference-in-differences analysis shows that, in equilibrium, firms still substitute towards more productive workers, adversely affecting less productive workers.

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