# RDP 2018-06: The Effect of Minimum Wage Increases on Wages, Hours Worked and Job Loss 8. Robustness Checks

I now consider a set of robustness checks on the baseline DD and DDD models. These tests are described in Sections 8.1–8.4 below, with the results for the full sample presented in Table 5.

## 8.1 Different Controls for Unobserved Group Effects

The baseline models assume that the effects of group-specific heterogeneity are linear (as captured by the continuous FWCk control). A more flexible parametisation is to use separate dummy variables for each award wage decile prior to FWC decisions. The baseline models also impose that the effects of group-specific heterogeneity are constant across each of the 11 FWC decisions. I relax both of these assumptions by including a set of wage decile dummies, along with interactions between these dummies and a set of dummy variables for each of the 11 FWC decisions (Table 5). The results are very similar to the baseline model.

Table 5: Robustness Tests
Effect of a 1 per cent increase in award wages, 1998–2008
Wages
(%)
Hours worked
(%)
Job destruction rate
(ppt)
Different controls for unobserved group effects
DD 0.84***
(0.03)
0.26
(0.37)
−0.35
(0.57)
DD for EBAs 0.03
(0.02)
0.09
(0.21)
0.42
(0.28)
DDD 0.81***
(0.03)
0.17
(0.42)
−0.77
(0.60)
Excluding jobs in Queensland
DD 0.82***
(0.03)
0.18
(0.44)
0.03
(0.45)
DD for EBAs 0.01
(0.02)
0.05
(0.29)
0.19
(0.27)
DDD 0.81***
(0.04)
0.12
(0.53)
−0.16
(0.53)
DD 1.26***
(0.05)
1.08*
(0.64)
na
na
DD for EBAs 0.17***
(0.03)
−0.15
(0.36)
na
na
DDD 1.08***
(0.05)
1.24*
(0.73)
na
na
Controlling for firm-specific shocks
DD 0.73***
(0.05)
−0.94*
(0.97)
−0.47
(0.71)
Notes: Standard errors (in parentheses) are clustered at the individual job level; ***, ** and * denote statistical significance at the 1, 5 and 10 per cent levels, respectively

## 8.2 Excluding Jobs in Queensland

My baseline results also assume that award wages are adjusted shortly after the FWC announcement. However, employees on certain state awards experienced a lag in the adjustment of their award wage due to a delay by their state industrial relations commission in ratifying the national decision.[15] This was particularly true for employees in Queensland, which was slower than the other states to ratify the increases in 2003, 2004 and 2005. My results are robust to excluding all jobs in Queensland from the sample (Table 5).