Minimum wage increases in a recessionary environment

• We analyze employment effects of minimum wage changes in the U.S.
• We use three data sets to focus on federal increases in the 2007–2009 period.
• Three different methods are used to address geographically-disperse trends.
• We provide limited evidence of overall disemployment effects.
• There is stronger evidence in states with higher unemployment rates.

Do seemingly large minimum-wage increases in an environment of deep recession produce clearer evidence of disemployment than is often observed in the modern minimum wage literature? This paper uses three data sets to examine the employment effects of the most recent increases in the U.S. minimum wage. We focus on two high-risk groups – restaurant-and-bar employees and teenagers – for the years 2005–2010. Although the evidence for a general disemployment effect is not uniform, estimates do suggest the presence of a negative minimum wage effect in states hardest hit by the recession.