The effects of minimum wages on employment and prices—Evidence from the hairdressing sector

• Published in: Labour economics Vol. 88; p. 102540
• Main Author: Kunaschk, Max
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.06.2024
• Subjects: Competitive labor markets; Minimum wage; Price pass-through; Price pass-through; J21; J31; J23; Minimum wage; Competitive labor markets; J38
• ISSN: 0927-5371; 1879-1034
• DOI: 10.1016/j.labeco.2024.102540

This paper provides comprehensive evidence on the labor and product market effects of a high-impact minimum wage introduction in the highly competitive hairdressing sector. Using detailed administrative data, I find negligible overall employment effects, even though the minimum wage substantially increased hourly wages. However, sub-group analyses reveal considerable heterogeneity in the estimated employment effects and suggest shifts away from marginal towards regular employment. Analyses of the price effects suggest that the reform increased output prices considerably, implying that consumers largely paid for the minimum wage. •I study the effects of a high-impact minimum wage introduction.•Using administrative data, I provide evidence on labor and product market outcomes.•Despite large hourly wage increases, overall employment effects are close to zero.•The results imply a shift from subsidized marginal to regular part-time employment.•Consumer prices increased substantially in response to the reform.