Decio Coviello, HEC

Minimum Wage and Individual Worker Productivity: Evidence from a Large US Retailer
Friday, 4 October 2019 - 2:30 pm to 4:00 pm
Contact information
Contact person: 
Abel Brodeur
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Cost to attend: 
Free of charge
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We study the effect of increasing the statutory minimum wage on individual worker productivity. Within a workforce of base+commission salespeople from a large US retailer, and using a border-discontinuity research design, we document that a $1 (1.5 standard deviations) increase in the minimum wage increases individual productivity (sales per hour) by 4.5%. With the help of a model, and of novel satellite imagery, we seek evidence in favor of two distinct channels through which this productivity gain could arise: a demand increase, and an incentive effect due to the increase in compensation. We find evidence only for the second, that is, the compensation channel: first, productivity gains are concentrated among low-productivity workers; second, productivity gains arise mostly during periods of high-unemployment, which when read through the lens of our model suggests an efficiency-wage story. We then document that the productivity gains of low-productive workers are sufficient to offset the higher worker pay, pointing to endogenous worker productivity as an explanation for why increasing the statutory minimum wage has no adverse employment effect.