Competition and Equal Pay Policy: Experimental Evidence

Last registered on March 24, 2022

View Trial History

Pre-Trial

Trial Information

General Information

Title

Does minimum wage affect ethnic hiring discrimination?

RCT ID

AEARCTR-0009009

Initial registration date

March 23, 2022

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published

March 24, 2022, 4:56 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country

Australia

Region

QLD

Primary Investigator

Name

Hairong Hu

Affiliation

Queensland University of Technology

Contact Primary Investigator

Other Primary Investigator(s)

Additional Trial Information

Status

In development

Start date

2022-03-01

End date

2024-02-29

Keywords

Behavior, Lab, Labor

Additional Keywords

Minimum wage, Employer discrimination, Labour market, Hiring discrimination, Lab experiment

JEL code(s)

Secondary IDs

Prior work

This trial is based on or builds upon one or more prior RCTs.

Abstract

In this experiment, we will experimentally examine the impact of minimum wage policy on employers’ hiring and wage decisions. We design a laboratory experiment where we will use reservation wage to stimulate the hoteling model (Hotelling, 1929) in order to introduce competition in hiring market. We consider different scenarios that vary the minimum wage that the employer must be offered: (i) no minimum wage; (ii) low minimum wage; (iii) high minimum wage. We will also compare these three difference scenarios between competitive market (where hiring competition exists) and non-competitive market (where hiring competition is absent). The experiment is designed to test three questions: (1) Whether and how minimum wage policy affects employers’ decisions toward ethnic majority and minority candidates differently; (2) Whether the impact on employers' decisions differs between a minimum wage and a much higher minimum wage; 3) whether the effects of minimum wages on employers' decisions differ between competitive and non-competitive labor markets.

External Link(s)

Registration Citation

Citation

Hu, Hairong. 2022. "Does minimum wage affect ethnic hiring discrimination?." AEA RCT Registry. March 24. https://doi.org/10.1257/rct.9009-1.0

Sponsors & Partners

Experimental Details

Interventions

Intervention(s)

Intervention Start Date

2022-03-31

Intervention End Date

2024-02-29

Primary Outcomes

Primary Outcomes (end points)

The main variable of interest is the probability of an individual being hired in different treatments, controlled by ethnicity, scores and age. Another main variable is the wage that an individual being offered in different treatments, controlled by ethnicity, scores and age
Secondary outcome variables are the percentage (%) of minority candidates being hired in different treatments and the differences in mean wage between majority candidates and minority candidates in different treatments.

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

Secondary Outcomes (explanation)

Experimental Design

We design a two-stage hiring game where the two participants (i.e. employers) will see four candidates, and they must decide whether to hire them or not in the first stage. If they decide to hire the candidate, they then need to choose a wage for their hired candidate in stage 2. We will introduce an intermediate hiring competition or a flexible wage scheme in the different treatments. To allow for learning effects, the participants will play this two-stage game in 5 independent rounds. The experiment is based on a between-subject design.
In the baseline treatment (Treatment A0), 2 employers will have a hiring competition if both employers decide to hire the same candidate, and they are free to choose different wage offer to different candidates (The profile of a candidate includes age, scores of a real effort task and their ethnicity information). As the main experimental variation (Treatment B0), we consider a non-competitive treatment where employers are free to choose different wage offer and always hire the preferred candidate without competition. We will introduce a reservation wage, R0, for each candidate. In the competitive environment (e.g. Treatment A0), one employer need to choose a wage higher than R0 to successfully hire the preferred candidate and the other employer need to choose a wage higher than 25-R0 to successfully hire the preferred candidate. R0 ranges from [5, ∞]. Therefore, in the baseline treatments, there is an implicit minimum wage of 5 points.
In the main treatments, 2 employers face different minimum wage policies: low minimum wage and high minimum wage under competitive environment (Treatment AL and Treatment AH) and under non-competitive environment (Treatment BL and Treatment BH).
The experiment is designed to examine the assumption that the employment elasticity for minority workers should be smaller than the employment elasticity workers if employers hold a bias and incur additional utility costs from hiring minority workers. And it also tests if the impact between a minimum wage and a much higher minimum wage on employer discrimination is different.

Experimental Design Details

Not available

Randomization Method

A computer

Randomization Unit

individual candidate

Was the treatment clustered?

Yes