Do Minimum Wage Hikes Reduce Employment? State-Level Evidence from the Low-Wage Retail Sector* MARK D. PARTRIDGE St. Cloud State University, St. Cloud, MN 56301 JAMIE S. PARTRIDGE St. Johns University/College of St. Benedict, St. Joseph, MN 56374 Several recent studies have challenged the conventional notion that raising the mini- mum wage reduces employment. This study considers this issue by examining the min- imum wage's influence on retail employment. Standard labor market analysis suggests that low-wage industries should be particularly sensitive to minimum wage hikes. There- fore, by considering retail employment using pooled-cross sectional, state-level data, this study extends recent research that generally emphasized teen employment. The empirical analysis considers state data from the latter 1980s, a unique period where many states raised their minimum wage above the federal level. Our results suggest that an increased minimum wage reduces retail employment, which is consistent with the standard labor market model. Moreover, further analysis indicates that minimum wage hikes also had relatively large adverse effects on total state employment growth, which implies that state minimum-wage policies can affect firm and household location. I. Introduction Raising the federal minimum wage has traditionally been viewed as an effective avenue to reduce poverty and to provide a "living wage" to workers at the bottom of the income ladder (Freeman, 1996; Kuttner, 1997). In fact, the declining value of the real mini- mum wage during the 1980s has been identified as possibly causing about 30 percent of the ensuing increase in wage inequality (Fortin and Lemieux, 1997). With inflation eroding the purchasing power of a fixed minimum wage, every few years there are calls to increase state and federal minimum wage rates, which keeps the minimum wage issue at the forefront of policy discussion. For example, even before the federal mini- mum wage increased to $5.15 an hour in September 1997, there were already propos- als to raise it to over $7.00 an hour (Reynolds, 1997). Conversely, economists have generally cautioned that raising the minimum wage has deleterious consequences including losses in employment, reduced general train- ing, and offsetting reductions in fringe benefits. In particular, conventional arguments suggest that employment losses should be concentrated among the less-skilled (e.g., JOURNAL OF LABOR RESEARCH Volume XX, Number 3 Summer 1999