Spillover Effects of Minimum Wages in Experimental Wage Negotiations

We conduct a laboratory experiment to study spillover effects of minimum wages on wages above the minimum. In a bilateral firm-worker bargaining setting, the participants sit face-to-face and make alternating offers. We find that the introduction of a minimum wage exerts upward pressure on wages even if the minimum wage is too low to be a binding restriction. Furthermore, raising the minimum wage to a binding level increases bargained wages strictly above the new minimum wage level. Our results show that wage negotiations might be an additional channel through which spillover effects of minimum wages might arise.