Minimum Wage Employment Effects and Labour Market Concentration.

This article investigates how local labour market concentration, measured primarily by the Herfindahl–Hirschman index (HHI), influences the employment effects of minimum wage increases in the United States. Using detailed data on job vacancies and employment in key low-wage sectors—specifically the General Merchandise Stores and fast-food industries—the study finds that minimum wage hikes lead to more positive employment outcomes in highly concentrated labour markets, where monopsonistic or oligopsonistic employer power is stronger. The authors develop and numerically solve a theoretical model of oligopsonistic competition that predicts these heterogeneous effects, which are empirically confirmed through multiple specifications, event-study analyses, and robustness checks. The findings suggest that labour market concentration is a significant factor explaining the mixed evidence on minimum wage employment effects in prior research and that proxies such as population density and establishment counts, while informative, are less predictive than occupational-level HHI measures.