When the minimum wage really bites hard: The negative spillover effect on high-skilled workers

Minimum wage levels are rising around the globe. To shed more light on possible unintended side effects of higher floors, we study impact a minimum introduction wages and employment in quasi-experimental setting where is set extraordinarily high during an economic downturn. We identify treatment along different skill groups find positive spillover for medium-skilled workers with salaries just above wage. More striking, negative high-skilled who further up distribution, followed by reduced returns to skills industry supply. explain these adjustments substitution-scale model that predicts whenever labor-labor substitutions toward overcompensated overall decline employment. Even though focus specialized industry, lay out general conditions under which such unfavorable may occur other contexts.