Israel Ministry of Finance
Eliezer Kaplan 1
Institutional Affiliation: Israel Ministry of Finance
NBER Working Papers and Publications
|December 2019||Who Pays for and Who Benefits from Minimum Wage Increases? Evidence from Israeli Tax Data on Business Owners and Workers|
with Lev Drucker, David Neumark: w26571
A key goal of a higher minimum wage is income redistribution towards low-income families. Existing research on the minimum wage focuses on the impact on affected workers, but is silent on the incomes of the owners of businesses who pay for a higher minimum wage. Higher minimum wages will do more to redistribute income if the owners of businesses who pay the higher minimum are at the top of the income distribution, and conversely if minimum wage employers hare relatively low incomes, the redistributional effects are weakened. We study evidence on this question using a unique administrative dataset on the universe of tax records for Israel, in the period surrounding a large minimum wage increase. We find that the minimum wage hike reduced profits of companies, with minimum-wage intensive...