Framing the minimum wage puzzle - estimating the effect of minimum wage policy on the real economy

In this dissertation, I attempt to reduce the uncertainty surrounding the effects of minimum wage policy in the United States, a web of federal, state, county and city level legislation. In Chapter 1 I show that the minimum wage is a political battleground and that there are major differences between places that increase it and those that do not. Once you factor in that conservative governments are less likely to increase the minimum wage, then you still see meaningful earnings effects, but no losses to employment. In Chapter 2 I shield the minimum wages effect estimates from these differences between states by comparing counties within states. Even though these have the same minimum wage (I exclude exceptions), they are not equally affected by minimum wage policy. I find that after a minimum wage increase, earnings rise more in `vulnerable' counties, whereas employment responses remain muted across the board. In Chapter 3, I take a step back and analyse the limits of empirical minimum wage research. I show that it is not possible to predict the effects of a large minimum wage change using only empirical evidence. Instead, it is necessary to assume how those results generalise to groups with different characteristics and when they receive a larger pay increase than we have seen in the past three decades.