Open Access Journal Article

Inflation’s Reduction of the Real Minimum Wage and Unemployment in the USA: 1987 to 2021

by Jonathan E. Leightner a,* orcid  and  Eric Jenkins a
Hull College of Business, Augusta University, Augusta, Georgia, USA
Author to whom correspondence should be addressed.
JEA  2024, 69; 3(3), 69;
Received: 24 July 2023 / Accepted: 2 September 2023 / Published Online: 15 September 2024


Hundreds of articles have been written that include empirical estimates of the dis-employment effects of minimum wages; however, many of these articles find statistically insignificant effects, some find significant negative effects, and a few find significant positive effects. Most of these studies use multivariate analyses which can be criticized for omitting key variables. The omitted variables problem ruins all statistics and estimates. This paper uses reiterative truncated projected least squares (RTPLS), a solution to the omitted variables problem, to estimate the percentage increase in unemployment due to a one percent increase in the real minimum wage using monthly data for the 50 states of the USA from 1987 to 2021. RTPLS produces a separate elasticity for every observation where differences in these estimates are due to omitted variables. We argue that RTPLS solves most of the econometric problems that David Neumark identified in his keynote address at a minimum wage conference in Berlin in 2018. We find that the percentage change in the unemployment rate due to a one percent change in the minimum wage ranges between 1.156 and 3.389, that the elasticities for different states tend to move together over time, and that all these elasticities are statistically significant at a 95 percent confidence level.

Copyright: © 2024 by Leightner and Jenkins. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
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ACS Style
Leightner, J. E.; Jenkins, E. Inflation’s Reduction of the Real Minimum Wage and Unemployment in the USA: 1987 to 2021. Journal of Economic Analysis, 2024, 3, 69.
AMA Style
Leightner J E, Jenkins E. Inflation’s Reduction of the Real Minimum Wage and Unemployment in the USA: 1987 to 2021. Journal of Economic Analysis; 2024, 3(3):69.
Chicago/Turabian Style
Leightner, Jonathan E.; Jenkins, Eric 2024. "Inflation’s Reduction of the Real Minimum Wage and Unemployment in the USA: 1987 to 2021" Journal of Economic Analysis 3, no.3:69.
APA style
Leightner, J. E., & Jenkins, E. (2024). Inflation’s Reduction of the Real Minimum Wage and Unemployment in the USA: 1987 to 2021. Journal of Economic Analysis, 3(3), 69.

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