Employment Effects of Minimum Wages: Evidence from a Quasi-Experiment

To estimate the impact of raising the minimum wage on employment, this paper uses a natural experiment, arising from six increases in the Western Australian statutory minimum wage during the period 1994-2001. Relative to the rest of Australia, the employment to population ratio in Western Australia fell by a statistically significant margin following four of the six increases. Aggregating the increases, the elasticity of labour demand with respect to the Western Australian statutory minimum wage is found to be -0.29. [Abstract amended to reflect March 2004 erratum]