• AAEA Talks

July 31, 2018

Time: 2:45–4:15 p.m. Tuesday, Aug. 7
Location: Virginia Suite A / Labor Supply, Demand, and Wages

Abstract

This paper investigates how the minimum wage and piece rate wages interact to affect worker productivity. For piece rate workers in the U.S., the minimum wage sets a lower bound on their earnings. While this earnings floor is inconsequential in high income industries, for piece rate workers in low-wage industries rising minimum wages may affect productivity. This paper focuses on workers paid piece rate for harvesting strawberries who frequently earn below the minimum hourly rate. A simple theoretical framework demonstrates how a minimum wage can cause workers to reduce effort and thus decrease productivity. I use payroll records of strawberry harvesters on a large farm in Northern California to test this prediction. Results from a fixed effects model support the theoretical prediction and find that a three percent increase in the minimum wage causes average workforce productivity to decrease by 6 to 9 percent.

*This is information about one of the 17 people from ARE with a presentation at the 2018 AAEA Annual Meeting Aug. 5–7 in Washington, D.C.

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