Monday, September 3, 2012
Myth Busting Data RE: Minimum Wage Increases
Two decades of rigorous economic research have found that raising the minimum wage does not result in job loss. While the simplistic theoretical model of supply and demand suggests that raising wages reduces jobs, the way the labor market functions in the real world is more complex. Researchers have examined the scores of minimum wage increases that have occurred at the state and federal level and found that these raises have not cut jobs or slowed job growth.
Minimum wage trends: Understanding past and contemporary research (2006) provides an overview of research on the economic effects of minimum wage increases.
Minimum Wage Effects Across State Borders (2010) provides the most sophisticated study to date of the effects of increases in the minimum wage on job growth in the United States. Taking advantage of the fact that a record number of states raised their minimum wages during the 1990s and 2000s – creating scores of differing minimum wage rates across the country – the study compares employment levels among every pair of neighboring U.S. counties that had differing minimum wage levels at any time between 1990 and 2006 and finds that higher minimum wages did not reduce employment.
Do Minimum Wages Really Reduce Teen Employment? (2011) examines every minimum wage increase in the United States over the past two decades—including increases that took place during protracted periods of high unemployment—and finds that raising the wage floor boosted incomes without reducing employment or slowing job creation. The research demonstrates how a body of previous research—one frequently relied on by business lobbyists who oppose minimum wage increases—inaccurately attributes declines in employment to increases in the minimum wage by failing to sufficiently account for critical economic factors.
The Wage and Employment Impact of Minimum-Wage Laws in Three Cities (2011) finds that the adoption of city-wide minimum wages in San Francisco and Santa Fe raised wages without cutting or slowing job growth. In 2004, San Francisco raised its minimum wage above the state minimum of $6.75 to $8.50, and Santa Fe raised its minimum wage above the state level of $5.15 to $8.50. By 2011, both cities’ minimum wages were close to $10.00 – the highest in the United States.
The Economic Effects of a Citywide Minimum Wage (2007) compares employment at restaurants in San Francisco and the neighboring East Bay before and San Francisco raised its minimum wage above the state minimum of $6.75 to $8.50 in 2004, and finds no reduction in employment or hours for restaurant workers in San Francisco.
Minimum Wage Impact on Unemployment: A Look at Indiana, Illinois and Surrounding Midwestern States (2008) compares employment in Illinois, which raised its minimum wage in 2004 and 2005, to employment in surrounding states. The study finds that wage increases did not impact Illinois’ employment growth, and controlling for other economic factors, Illinois had higher employment growth than its neighboring states.
States with Minimum Wages above the Federal Level have had Faster Small Business and Retail Job Growth (2006) examines growth in employment from 1998 to 2003 for small businesses with fewer than 50 employees, and found that employment in small businesses grew faster in states with minimum wages above the federal minimum wage than in states where the federal minimum of $5.15 an hour prevailed. In addition, the number of small businesses also grew faster in the states with higher minimum wages.
Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania (1994) is a landmark study published by David Card and Alan Krueger in the American Economic Review examining employment at fast-food restaurants on both sides of the New Jersey-Pennsylvania border after New Jersey raised its minimum wage to $5.05 an hour while Pennsylvania’s minimum wage held constant. The authors conducted a phone survey of over 400 fast-food restaurants and found no evidence that the increase in the minimum wage in New Jersey led to job loss—in fact they found employment increased in fast-food restaurants in New Jersey. For this and related research, Card was awarded the John Bates Clark medal in 1995—the so-called “junior Nobel prize,” granted by the American Economics Association every two years to the best economist under forty.
Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply (2000) is a follow-up study by David Card and Alan Krueger that repeats their 1994 analysis, but uses official government data to determine employment figures. The study finds that the minimum wage increase in New Jersey did not affect employment in fast-food restaurants after New Jersey’s 1991 increase or after the 1996-1997 federal increases eliminated the differences in minimum wages between the two states.
Hundreds of Economists Say: Raise the Minimum Wage (2006) is an open letter from more than 650 economists, including 5 Nobel prize winners and 6 past presidents of the American Economic Association, stating that increasing federal and state minimum wages, with annual cost-of-living adjustments for inflation, "can significantly improve the lives of low-income workers and their families, without the adverse effects that critics have claimed."
What is Causing Record-Breaking Teen Unemployment? (2011) is a data brief from the National Employment Law Project that finds that, like the high adult unemployment that plagues our economy, teen unemployment has been driven by the aftermath of the Great Recession and macroeconomic trends shaping the labor market—not by long-overdue increases in the minimum wage.