The Employment and Wage Effects of Arkansas's Minimum Wage Increase: A Difference-in-Differences Analysis

Abstract

In November 2018, Arkansas voters approved a ballot initiative (Issue 5) to raise the state minimum wage from \$8.50 to \$11.00 per hour over three years (2019–2021), representing a 29% increase. Using Census PUMS microdata and a difference-in-differences design comparing Arkansas to neighboring states that remained at the federal minimum wage, I examine the effects on wages, employment, and hours worked. I find that the minimum wage increase successfully raised wages for low-wage workers, with Arkansas workers maintaining a wage premium over control states throughout the post-period. The employment effect is essentially zero (0.1 percentage points), consistent with recent minimum wage literature finding small or null disemployment effects. These results suggest that even a relatively large minimum wage increase—reaching 74% of Arkansas's median wage—can raise the wage floor without substantial employment losses. \medskip JEL Codes: J31, J38, J23 Keywords: minimum wage, employment, Arkansas, difference-in-differences