The Unintended Labor Scheduling Implications of Minimum Wage

The effect of minimum wage is an important yet controversial topic that has received attention for decades. While there is a belief in the general public that a higher minimum wage improves worker welfare, the scholarly work investigating the impact of minimum wage on employment has been mixed. We contribute to this debate by showing the first empirical evidence that minimum wage leads to changes in firms' labor scheduling practices that reduce firms' labor costs but are detrimental to workers' welfare. Namely, using a dataset from a national fashion retailer, we estimate that a $1 increase in minimum wage, while having a negligible impact on the total labor hours used by the retailer, leads to a 27.7% increase in the number of workers scheduled per week, but a 20.8% reduction in weekly hours per worker. For an average store in California, these changes translate into four extra workers and five less hours per worker per week. Such scheduling adjustment not only reduces the total wage compensation per worker but also reduces workers' eligibility for benefits. We also show that the minimum wage increase reduces the consistency of weekly and daily schedules for workers. For example, the absolute (relative) deviation in weekly hours worked by each worker increases by up to 33.0% (6.7%) and in daily hours by up to 9.5% (2.0%), as minimum wage increases by $1.