The effect of minimum wage is an important yet controversial topic that has received attention for decades. While there is a belief among the general public that a higher minimum wage improves worker welfare, the findings of the scholarly work investigating the impact of minimum wage on employment have been mixed.
Qiuping Yu, assistant professor of operations management at the Georgia Tech Scheller College of Business, partnered with Shawn Mankad, Cornell University, and Masha Shunko, University of Washington, to contribute to this debate by studying the labor scheduling implications of minimum wage increases. They provide the first empirical evidence that increases can lead to changes in firms' labor scheduling practices that reduce firms' labor costs but are detrimental to worker welfare.
Using a dataset from a national fashion retailer, Yu, Mankad, and Shunko estimate that a $1 increase in minimum wage, while having a negligible impact on the total labor hours used by the retailer, leads to a 27.7% increase in the number of workers scheduled per week, but a 20.8% reduction in weekly hours per worker. For an average store in California, these changes translate into four extra workers and five less hours per worker per week. Such scheduling adjustments not only reduce the total wage compensation per worker but may also reduce eligibility for benefits. They also show that the minimum wage increase reduces the consistency of weekly and daily schedules for workers, making it challenging to secure financial stability and coordinate with a second job, childcare, or other personal demands.
Their results imply that to achieve the objective of improving worker welfare through minimum wage policies, policy makers should proceed with extra caution. A potential approach may be to couple any minimum wage increase with additional mechanisms to ensure the consistency and adequacy of workers' schedules. Such additional mechanisms, however, should be carefully designed to avoid negative burden on the companies that can lead to job losses.
Read “The Unintended Labor Scheduling Implications of Minimum Wage” working paper to learn more.