Puerto Rico's minimum wage: Revisiting a price floor with bite

Omberg, Robert Tucker

Puerto Rico's minimum wage: Revisiting a price floor with bite

IZA Journal of Labor Policy

Volume 11 (2021): Issue 1 (January 2021)

By:

Robert Tucker Omberg

Open Access

|Nov 2021

Figures & Tables

Distribution of Wages in Puerto Rico in 2006 and 2010.

Distribution of Wages in Puerto Rico in 2000 and 2006.

Distribution of Wages in U.S. States with Subfederal Minimum Wages in 2006 and 2010.

Distribution of Wages for Workers Aged 15–24 in Puerto Rico in 2006 and 2010.

Treatment E effects and Placebo Test: Teen Employment (International Donors).Source: (A) Actual vs. Synthetic Control. (B) Placebo Test.

Path of GDP per Capita in Actual and Synthetic Puerto Rico.

Comparisons Between Actual and Synthetic Puerto Rico (GDP Matching).Source: (A) Path of GDP. (B) Path of Teen/Young Adult Employment. (C) Path of Total Employment.

Bite of the Minimum Wage Across Puerto Rican Industries.

Treatment Effects and Placebo Test: Accommodation and Food Industry (Island Industry Donors).Source: (A) Actual vs. Synthetic Control (B) Placebo Test (Donors with >2 × PRI Pre Treatment RMSE Dropped).

Treatment Effects and Placebo Test: Accommodation and Food Industry (USA MSA Donors).Source: (A) Actual vs. Synthetic Control (B) Placebo Test (Donors with >2 × PRI Pre Treatment RMSE Dropped). MSA, metropolitan statistical area; RMSE, root mean squared error.

Estimated Own-Wage Elasticities of Employment

Model	Group	Method	Dependent	MW	MW	Own-Wage
			Variable	Elasticity	Coverage	Elasticity
(1)	Ages 15–24	Synthetic Control	ln(employmetpopulation)\ln \left({{{{\rm{employmet}}} \over {{\rm{population}}}}} \right)	−0.74	76%	−0.97
(2)	Ages 15–24	Triple Differences	ln(employmetpopulation)\ln \left({{{{\rm{employmet}}} \over {{\rm{population}}}}} \right)	−1.26	76%	−1.65
(3)	Ages 15–24	Limited Donors	ln(employmetpopulation)\ln \left({{{{\rm{employmet}}} \over {{\rm{population}}}}} \right)	−0.39	76%	−0.51
(4)	Ages 15–24	(2) & (3)	ln(employmetpopulation)\ln \left({{{{\rm{employmet}}} \over {{\rm{population}}}}} \right)	−0.43	76%	−0.56
(5)	Ages 15–24	GDP Matching	ln(employmetpopulation)\ln \left({{{{\rm{employmet}}} \over {{\rm{population}}}}} \right)	−0.49	76%	−0.65
(6)	Ages 15–24	(2) & (5)	ln(employmetpopulation)\ln \left({{{{\rm{employmet}}} \over {{\rm{population}}}}} \right)	−0.55	76%	−0.72
(7)	All Workers	Synthetic Control	ln(employmetpopulation)\ln \left({{{{\rm{employmet}}} \over {{\rm{population}}}}} \right)	−0.28	46%	−0.60
(8)	All Workers	Limited Donors	ln(employmetpopulation)\ln \left({{{{\rm{employmet}}} \over {{\rm{population}}}}} \right)	−0.22	46%	−0.49
(9)	All Workers	GDP Matching	ln(employmetpopulation)\ln \left({{{{\rm{employmet}}} \over {{\rm{population}}}}} \right)	−0.27	46%	−0.59
(10)	Restaurant Workers	Cross Industry	ln(employment)	−0.66	69%	−0.95
(11)	Restaurant Workers	USA MSA Donors	ln(employmetpopulation)\ln \left({{{{\rm{employmet}}} \over {{\rm{population}}}}} \right)	−0.23	65%	−0.35
(12)	Restaurant Workers	USA MSA Donors	ln(employment)	−0.14	65%	−0.22

Treatment Effects and Significance for Log Employment in Puerto Rican Accommodation and Food Industry (Puerto Rican Industry Donors)

Period	Estimated Effect	P-Value (One Sided)	Adjusted P-Value
Q4 2007	−0.0502	0.214	0
Q1 2008	−0.0673	0.071	0
Q2 2008	−0.0590	0.214	0.071
Q3 2008	−0.0764	0.071	0
Q4 2008	−0.0887	0	0
Q1 2009	−0.1049	0.071	0
Q2 2009	−0.1044	0.142	0
Q3 2009	−0.1081	0.214	0
Q4 2009	−0.0998	0.285	0.071
Q1 2010	−0.0906	0.214	0.142
Q2 2010	−0.0829	0.285	0.142
Q3 2010	−0.0916	0.214	0.071
Q4 2010	−0.0879	0.214	0.071
Q1 2011	−0.0775	0.214	0.071
Q2 2011	−0.0901	0.285	0.071
Q3 2011	−0.0972	0.214	0.071
Q4 2011	−0.0806	0.357	0.071
Q1 2012	−0.0868	0.214	0.071
Q2 2012	−0.0851	0.285	0.071
Q3 2012	−0.0751	0.285	0.071

Weights for Constructing Synthetic Accommodation and Food Industry (Puerto Rican Industry Donors)

Industry	Weight
Education	0.06
Health	0.587
Professional Services	0.187
Retail	0.22

Treatment Effects and Significance for Log Teen Employment/Population Ratio in Puerto Rico

Period	Estimated Effect	P-Value	Adjusted P-Value
2007	−0.065	0.221	0.662
2008	−0.082	0.205	0.610
2009	−0.137	0.103	0.558
2010	−0.238	0.036	0.426
2011	−0.350	0.010	0.338
2012	−0.341	0.010	0.359
2013	−0.349	0.041	0.354
2014	−0.343	0.052	0.374
2015	−0.339	0.067	0.400
2016	−0.314	0.098	0.436
2017	−0.300	0.103	0.477

Weights for Constructing Synthetic Puerto Rico (GDP Matching)

Country	Weight
United Arab Emirates	0.112
Equatorial Guinea	0.149
Ireland	0.046
Iraq	0.085
South Korea	0.312
Lebanon	0.190
Norway	0.106

Treatment Effects and Significance for Log Employment/Population Ratio in Puerto Rican Accommodation and Food Industry (USA Donors) (Truncated to Quarterly for Space)

Period	Estimated Effect	P-Value (One-Sided)	Adjusted P-Value
Jul-07	−0.0754	0.049	0.0693
Oct-07	−0.0892	0.049	0.049
Jan-08	−0.0417	0.2376	0.5445
Apr-08	−0.0830	0.0693	0.2277
Jul-08	−0.1050	0.039	0.2079
Oct-08	−0.1256	0.029	0.1485
Jan-09	−0.0863	0.1089	0.3960
Apr-09	−0.1110	0.0990	0.3168
Jul-09	−0.1180	0.1089	0.2277
Oct-09	−0.0911	0.1386	0.3069
Jan-10	−0.0760	0.1782	0.4158
Apr-10	−0.1021	0.1485	0.3663
Jul-10	−0.1276	0.0792	0.2277
Oct-10	−0.1220	0.0891	0.3267
Jan-11	−0.0579	0.3267	0.6336
Apr-11	−0.0918	0.1782	0.4851
Jul-11	−0.1058	0.1584	0.4158
Oct-11	−0.0780	0.2277	0.5841
Jan-12	−0.0749	0.2475	0.6336
Apr-12	−0.098	0.1683	0.5049
Jul-12	−0.1172	0.1287	0.3861
Oct-12	−0.0727	0.2772	0.6336
Jan-13	−0.0416	0.5544	0.7425
Apr-13	−0.0919	0.1881	0.5049
Jul-13	−0.1155	0.1386	0.3762
Oct-13	−0.1157	0.1584	0.4059
Jan-14	−0.0829	0.2574	0.4653
Apr-14	−0.1382	0.1386	0.3564
Jul-14	−0.1579	0.0891	0.3168
Oct-14	−0.1520	0.1188	0.3564

Treatment Effects and Significance for Log Teen Employment/Population Ratio in Puerto Rico (Limited Donor Pool)

Period	Estimated Effect	P-Value	Adjusted P-Value
2007	−0.058	0.244	0.694
2008	−0.101	0.178	0.644
2009	−0.171	0.111	0.550
2010	−0.217	0.078	0.527
2011	−0.263	0.044	0.439
2012	−0.169	0.138	0.605
2013	−0.190	0.122	0.594
2014	−0.153	0.222	0.617
2015	−0.101	0.389	0.783
2016	−0.117	0.316	0.750
2017	−0.048	0.656	0.894

Characteristics of Puerto Rican Workers

Group	Count	% Male	% Employed	Average Hourly Earnings ($)	% Making $7.25/h or less
Puerto Ricans (2006)	34,746	47.18	29.92	11.34	46
Ages 15–24	4,900	51.78	23.53	6.56	76
Accommodation and Food	822	50.49	N/A	7.38	69
Puerto Ricans (2010)	36,032	47.15	29.26	12.21	35
Ages 15–24	4,982	51.45	19.41	8.36	58
Accommodation and Food	842	51.61	N/A	8.77	55
All Americans (2006)	2,969,741	48.61	46.84	21.49	12
Ages 15–24	3,80,233	51.17	45.76	10.19	30
Accommodation and Food	1,16,917	41.92	N/A	11.45	41
All Americans (2010)	3,061,692	48.63	44.87	21.92	10
Ages 15–24	3,85,912	51.37	40.10	10.72	24
Accommodation and Food	1,12,864	43.81	N/A	11.98	32

Pre-Treatment Log Employment in Actual and Synthetic Accommodation and Food Industry (USA Donors)

Period	Accommodation and Food	Synthetic Accommodation and Food
Jan 2003	3.91	3.91
Jun 2003	3.94	3.94
Jan 2004	3.98	3.97
Jun 2004	3.96	3.98
Jan 2005	4.00	4.00
Jun 2005	4.01	3.99
Jan 2006	3.97	3.98
Jun 2006	3.97	3.98
Jan 2007	3.96	3.96
Jun 2007	3.96	3.98

Treatment Effects and Significance for Log Total Employment/Population Ratio in Puerto Rico (Limited Donor Pool)

Period	Estimated Effect	P-Value	Adjusted P-Value
2007	−0.037	0.294	0.567
2008	−0.059	0.239	0.478
2009	−0.097	0.133	0.378
2010	−0.113	0.106	0.367
2011	−0.106	0.128	0.439
2012	−0.084	0.183	0.500
2013	−0.075	0.250	0.561
2014	−0.092	0.206	0.494
2015	−0.087	0.217	0.522
2016	−0.083	0.239	0.511
2017	−0.089	0.228	0.522

Treatment Effects and Significance for Log Teen Employment/Population Ratio in Puerto Rico (Placebo Treatment Date of 2000)

Period	Estimated Effect	P-Value	Adjusted P-Value
2001	−0.031	0.323	0.810
2002	−0.046	0.379	0.795
2003	−0.047	0.467	0.851
2004	−0.061	0.354	0.800
2005	−0.081	0.338	0.784
2006	−0.152	0.107	0.677

Bite of the Minimum Wage Across Groups

Group	% Earning 7.25/h or less in 2006 (%)	% Earning 7.25/h or less in 2010 (%)
All Puerto Ricans	46	35
Puerto Ricans Aged 15–24	76	58
Accommodation and Food Workers	69	55
Accommodation and Food Workers (San Juan)	65	50
Retail Workers	62	47
Education Workers	20	17
Health Workers	43	37
Manufacturing Workers	39	25
Professional Services Workers	37	46

Weights for Constructing Synthetic Puerto Rico (Limited Donor Pool)

Country	Weight
Barbados	0.48
Comoros	0.422
Sri Lanka	0.083
United States	0.015

Pre-Treatment Log Employment/Population Ratio in Actual and Synthetic Accommodation and Food Industry (USA Donors)

Period	Accommodation and Food	Synthetic Accommodation and Food
Jan 2003	0.663	0.654
Jun 2003	0.692	0.707
Jan 2004	0.732	0.711
Jun 2004	0.708	0.735
Jan 2005	0.749	0.696
Jun 2005	0.738	0.735
Jan 2006	0.765	0.723
Jun 2006	0.723	0.750
Jan 2007	0.710	0.756
Jun 2007	0.710	0.798

Weights for Constructing Synthetic Puerto Rico

Country	Weight
Suriname	0.349
Norway	0.328
Macedonia	0.16
Gabon	0.16
Lesotho	0.003

Treatment Effects and Significance for Log Total Employment/Population in Puerto Rico

Period	Estimated Effect	P-Value	Adjusted P-Value
2007	−0.043	0.312	0.451
2008	−0.063	0.179	0.410
2009	−0.114	0.046	0.267
2010	−0.132	0.041	0.282
2011	−0.124	0.046	0.312
2012	−0.108	0.097	0.369
2013	−0.101	0.138	0.431
2014	−0.119	0.102	0.364
2015	−0.111	0.144	0.405
2016	−0.097	0.201	0.451
2017	−0.097	0.200	0.451

Treatment Effects and Significance for Log Employment in Puerto Rican Accommodation and Food Industry (Placebo Treatment Date of Q4 2000)

Period	Estimated Effect	P-Values (One Sided)	Adjusted P-Values
Q1 2001	−0.0111	0.285	0.642
Q2 2001	0.0079	0.642	0.714
Q3 2001	−0.0103	0.214	0.642
Q4 2001	−0.0183	0.214	0.571
Q1 2002	−0.0491	0.214	0.142
Q2 2002	−0.0567	0.357	0.214
Q3 2003	−0.0352	0.357	0.428
Q4 2003	−0.0437	0.428	0.357
Q1 2004	−0.0356	0.428	0.428
Q2 2004	−0.0439	0.428	0.428
Q3 2004	−0.0417	0.357	0.571
Q4 2004	−0.0524	0.428	0.357
Q1 2005	−0.0304	0.357	0.571
Q2 2005	−0.0450	0.285	0.428
Q3 2005	−0.0649	0.428	0.285
Q4 2005	−0.0413	0.357	0.500
Q1 2006	−0.0337	0.357	0.571
Q2 2006	−0.0218	0.357	0.714
Q3 2006	−0.0117	0.357	0.857
Q4 2006	−0.0064	0.5	0.857
Q1 2007	−0.0120	0.357	0.785

Indicators in Puerto Rico vs_ Synthetic Puerto Rico

Indicator	Puerto Rico	Synthetic Puerto Rico
GDP Growth (%)	3.71	2.18
GDP per capita ($)	29,043	25,731
Male Teen Population (%)	9.0	8.4
Female Teen Population (%)	8.2	8.1

Indicators in Puerto Rico vs_ Synthetic Puerto Rico (GDP Matching)

Indicator	Puerto Rico	Synthetic Puerto Rico
GDP per capita in 1991	22579.09	23501.23
GDP per capita in 1995	26027.23	25976.47
GDP per capita in 2000	31005.18	30950.21
GDP per capita in 2003	33147.79	32690.81
GDP per capita in 2005	35375.3	35005.24
GDP per capita in 2007	34820.77	35557.17
GDP per capita in 2009	33892.85	34206.46
GDP per capita in 2010	33924.06	33746.06
GDP per capita in 2011	34195.65	34173.33
GDP per capita in 2013	34913.63	34731.05
GDP per capita in 2015	35314.43	35581.21
GDP per capita in 2017	35403.01	35840.44

Treatment Effects and Significance for Log Employment in Puerto Rican Accommodation and Food Industry (USA Donors) (Truncated to Quarterly for Space)

Period	Estimated Effect	P-Value (One-Sided)	Adjusted P-Value
Jul-07	−0.008	0.67	0.72
Oct-07	−0.026	0.29	0.31
Jan-08	−0.013	0.60	0.65
Apr-08	−0.063	0.08	0.04
Jul-08	−0.041	0.22	0.23
Oct-08	−0.033	0.41	0.43
Jan-09	−0.061	0.22	0.24
Apr-09	−0.039	0.33	0.36
Jul-09	−0.029	0.47	0.53
Oct-09	−0.011	0.73	0.76
Jan-10	−0.036	0.46	0.48
Apr-10	−0.046	0.37	0.41
Jul-10	−0.054	0.31	0.34
Oct-10	−0.035	0.5	0.54
Jan-11	−0.051	0.39	0.41
Apr-11	−0.040	0.54	0.58
Jul-11	−0.026	0.69	0.75
Oct-11	−0.005	0.93	0.94
Jan-12	−0.046	0.51	0.54
Apr-12	−0.042	0.50	0.54
Jul-12	−0.026	0.68	0.71
Oct-12	0.016	0.83	0.87
Jan-13	−0.027	0.73	0.79
Apr-13	−0.031	0.61	0.63
Jul-13	−0.03	0.62	0.65
Oct-13	−0.008	0.88	0.91
Jan-14	−0.051	0.50	0.5
Apr-14	−0.061	0.39	0.38
Jul-14	−0.054	0.43	0.48
Oct-14	−0.072	0.38	0.36

Pre-Treatment Log Employment in Actual and Synthetic Accommodation and Food Industry (Puerto Rican Industry Donors)

Period	Accommodation & Food	Synthetic Accommodation & Food
Q1 1995	3.772761	3.814832
Q3 1997	3.972177	3.97396
Q1 2000	4.11741	4.117964
Q3 2002	4.149464	4.150361
Q1 2005	4.239887	4.227708

Weights for Constructing Synthetic Accommodation and Food Industry (USA Donors)

MSA	Weight	A&F MW Coverage (%)
Trenton, NJ	0.443	0
Tampa-St. Petersburg, FL	0.106	37
Miami-Ft. Lauderdale, FL	0.444	32
Tucson, AZ	0.007	43

Indicators in Puerto Rico vs_ Synthetic Puerto Rico (Limited Donor Pool)

Indicator	Puerto Rico	Synthetic Puerto Rico
GDP Growth	3.39	2.15
GDP per capita	29,417.35	9,061.07
Male Teen Population	8.98	9.41
Female Teen Population	8.12	8.96
Male Young Adult Population	8.23	8.68
Female Young Adult Population	7.71	8.31
ln(EmploymentPopulation)\ln \left({{{{\rm{Employment}}} \over {{\rm{Population}}}}} \right) in 1991	3.36	3.37
ln(EmploymentPopulation)\ln \left({{{{\rm{Employment}}} \over {{\rm{Population}}}}} \right) in 1995	3.39	3.41
ln(EmploymentPopulation)\ln \left({{{{\rm{Employment}}} \over {{\rm{Population}}}}} \right) in 2000	3.49	3.43
ln(EmploymentPopulation)\ln \left({{{{\rm{Employment}}} \over {{\rm{Population}}}}} \right) in 2005	3.33	3.37

DOI: https://doi.org/10.2478/izajolp-2021-0009 | Journal eISSN: 2193-9004

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Language: English

Accepted on: Oct 18, 2021

Published on: Nov 25, 2021

Published by: Sciendo

In partnership with: Paradigm Publishing Services

Publication frequency: 1 times per year

Keywords:

Minimum Wage,

Puerto Rico,

Synthetic Controls

Related subjects:

Business and economics,

Mathematics and statistics for economists,

Econometrics

© 2021 Robert Tucker Omberg, published by Sciendo
This work is licensed under the Creative Commons Attribution 4.0 License.

Previous article Volume 11 (2021): Issue 1 (January 2021)

Puerto Rico's minimum wage: Revisiting a price floor with bite

Figures & Tables

Figure 1

Figure 2

Figure 3

Figure 4

Figure 5

Figure 6

Figure 7

Figure 8

Figure 9

Figure 10

Estimated Own-Wage Elasticities of Employment

Treatment Effects and Significance for Log Employment in Puerto Rican Accommodation and Food Industry (Puerto Rican Industry Donors)

Weights for Constructing Synthetic Accommodation and Food Industry (Puerto Rican Industry Donors)

Treatment Effects and Significance for Log Teen Employment/Population Ratio in Puerto Rico

Weights for Constructing Synthetic Puerto Rico (GDP Matching)

Treatment Effects and Significance for Log Employment/Population Ratio in Puerto Rican Accommodation and Food Industry (USA Donors) (Truncated to Quarterly for Space)

Treatment Effects and Significance for Log Teen Employment/Population Ratio in Puerto Rico (Limited Donor Pool)

Characteristics of Puerto Rican Workers

Pre-Treatment Log Employment in Actual and Synthetic Accommodation and Food Industry (USA Donors)

Treatment Effects and Significance for Log Total Employment/Population Ratio in Puerto Rico (Limited Donor Pool)

Treatment Effects and Significance for Log Teen Employment/Population Ratio in Puerto Rico (Placebo Treatment Date of 2000)

Bite of the Minimum Wage Across Groups

Weights for Constructing Synthetic Puerto Rico (Limited Donor Pool)

Pre-Treatment Log Employment/Population Ratio in Actual and Synthetic Accommodation and Food Industry (USA Donors)

Weights for Constructing Synthetic Puerto Rico

Treatment Effects and Significance for Log Total Employment/Population in Puerto Rico

Treatment Effects and Significance for Log Employment in Puerto Rican Accommodation and Food Industry (Placebo Treatment Date of Q4 2000)

Indicators in Puerto Rico vs_ Synthetic Puerto Rico

Indicators in Puerto Rico vs_ Synthetic Puerto Rico (GDP Matching)

Treatment Effects and Significance for Log Employment in Puerto Rican Accommodation and Food Industry (USA Donors) (Truncated to Quarterly for Space)

Pre-Treatment Log Employment in Actual and Synthetic Accommodation and Food Industry (Puerto Rican Industry Donors)

Weights for Constructing Synthetic Accommodation and Food Industry (USA Donors)

Indicators in Puerto Rico vs_ Synthetic Puerto Rico (Limited Donor Pool)

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