The Impact of the Minimum Wage on DI Participation


Publication Date: January 2020

Publisher: Center for Retirement Research at Boston College

Author(s): Gary Engelhardt

Research Area: Labor

Keywords: Financing Retirement

Type: Report

Coverage: United States

Abstract:

This report provides an empirical analysis of the impact of the minimum wage on DI claims and awards. It draws on data from the Social Security Administration’s State Agencies Monthly Workload Dataset, from which a state-by-year panel of DI claims and awards is constructed for 2002-2017 and matched to data on the real effective minimum wage, the higher of the federal and state minimum wage in each state and year. Then two reduced-form estimation methodologies are employed. The first follows studies in the hourly wage-inequality literature and models log DI claims as a function of the bindingness of the minimum wage in the state hourly wage distribution. The second follows studies in the minimum wage disemployment literature and models log claims (in both levels and first-differences) as a function of a distributed lag of the minimum wage.