Policy Brief

Potential Policy Confounds of Minimum Wage Employment Estimates

This note serves as a companion paper to the synthetic control analysis of minimum wages in Wiltshire, McPherson, Reich and Sosinskiy 2024. As we discuss there, a credible synthetic control method must check for confounding events that differently affected the treatment and control groups during the treatment period. California, but not New York, did indeed institute policies during the treatment period that were not matched in our donor pool. And the large federal pandemic recovery programs that began in 2020 may have
had heterogeneous effects in our treatment and control areas. Such factors could confound our identification of minimum wages as the cause of changes in pay and employment in low-wage jobs. We discuss these potential state and federal policy confounds here.