Overwhelming majority of studies show raising minimum wage costs jobs

It is a fundamental reality that the left ignore as they seek to raise the minimum wage to $15.  That is, there will be significant job losses among the least skilled workers over a period of time.

In an excellent analysis in the Wall Street Journal, economist David Neumark destroys the argument that raising the minimum wage doesn't cost jobs by citing several studies representing the overwhelming evidence that gives the lie to the myth that raising the minimum wage doesn't hurt the least skilled and most vulnerable workers.

Economists have written scores of papers on the topic dating back 100 years, and the vast majority of these studies point to job losses for the least-skilled. They are based on fundamental economic reasoning—that when you raise the price of something, in this case labor, less of it will be demanded, or in this case hired.

Among the many studies supporting this conclusion is one completed earlier this year by Texas A&M’s Jonathan Meer and MIT’s Jeremy West, which reaffirmed that “the minimum wage reduces job growth over a period of several years” and that “industries that tend to have a higher concentration of low-wage jobs show more deleterious effects on job growth from higher minimum wages.”

The broader research confirms this. An extensive survey of decades of minimum-wage research, published by William Wascher of the Federal Reserve Board and me in a 2008 book titled “Minimum Wages,” generally found a 1% or 2% reduction for teenage or very low-skill employment for each 10% minimum-wage increase.

That has long been the view of most economists, although there are some outliers. In 1994 two Princeton economists, David Card (now at Berkeley) and Alan Krueger, published a study of changes in employment in fast-food restaurants in New Jersey and Pennsylvania after the minimum wage went up in New Jersey. The study not only failed to find employment losses in New Jersey, it reported sharp employment gains. The study has been widely cited by proponents of a higher minimum wage, even though further scrutiny showed that it was flawed. My work with William Wascher showed that the survey data collected were so inaccurate that they badly skewed the study’s findings.

Other studies that seek to prove that raising the minimum wage doesn't cost jobs are even more problematic.  A 2010 study by Arindrajit Dube of the University of Massachusetts-Amherst, T. William Lester of the University of North Carolina at Chapel Hill, and Michael Reich of the University of California, Berkeley found “no detectable employment losses from the kind of minimum wage increases we have seen in the United States.”

They argue that the only way to accurately discover whether minimum wages cause job losses is by limiting control groups to bordering states and counties because they’re most likely to have experienced similar economic conditions. This approach led to estimates of job losses from minimum wages that are effectively zero.

But as Ian Salas of Johns Hopkins, William Wascher and I pointed out in a 2014 paper, there are serious problems with the research designs and control groups of the Dube et al. study. When we let the data determine the appropriate control states, rather than just assuming—as Dube et al. do—that the bordering states are the best controls, it leads to lower teen employment. A new study by David Powell of Rand, taking the same approach but with more elegant solutions to some of the statistical challenges, yields similar results.

I think all of these cities that are raising the minimum wage to $15 an hour are going to have to discover themselves the error of their ways.  But when the jobs start disappearing and most of the protestors lose employment, they will remain as clueless about the cause of their troubles as they are today.  They will blame "greedy businessmen" instead of pandering politicians who are as ignorant of basic economics as the protesters are.

It is a fundamental reality that the left ignore as they seek to raise the minimum wage to $15.  That is, there will be significant job losses among the least skilled workers over a period of time.

In an excellent analysis in the Wall Street Journal, economist David Neumark destroys the argument that raising the minimum wage doesn't cost jobs by citing several studies representing the overwhelming evidence that gives the lie to the myth that raising the minimum wage doesn't hurt the least skilled and most vulnerable workers.

Economists have written scores of papers on the topic dating back 100 years, and the vast majority of these studies point to job losses for the least-skilled. They are based on fundamental economic reasoning—that when you raise the price of something, in this case labor, less of it will be demanded, or in this case hired.

Among the many studies supporting this conclusion is one completed earlier this year by Texas A&M’s Jonathan Meer and MIT’s Jeremy West, which reaffirmed that “the minimum wage reduces job growth over a period of several years” and that “industries that tend to have a higher concentration of low-wage jobs show more deleterious effects on job growth from higher minimum wages.”

The broader research confirms this. An extensive survey of decades of minimum-wage research, published by William Wascher of the Federal Reserve Board and me in a 2008 book titled “Minimum Wages,” generally found a 1% or 2% reduction for teenage or very low-skill employment for each 10% minimum-wage increase.

That has long been the view of most economists, although there are some outliers. In 1994 two Princeton economists, David Card (now at Berkeley) and Alan Krueger, published a study of changes in employment in fast-food restaurants in New Jersey and Pennsylvania after the minimum wage went up in New Jersey. The study not only failed to find employment losses in New Jersey, it reported sharp employment gains. The study has been widely cited by proponents of a higher minimum wage, even though further scrutiny showed that it was flawed. My work with William Wascher showed that the survey data collected were so inaccurate that they badly skewed the study’s findings.

Other studies that seek to prove that raising the minimum wage doesn't cost jobs are even more problematic.  A 2010 study by Arindrajit Dube of the University of Massachusetts-Amherst, T. William Lester of the University of North Carolina at Chapel Hill, and Michael Reich of the University of California, Berkeley found “no detectable employment losses from the kind of minimum wage increases we have seen in the United States.”

They argue that the only way to accurately discover whether minimum wages cause job losses is by limiting control groups to bordering states and counties because they’re most likely to have experienced similar economic conditions. This approach led to estimates of job losses from minimum wages that are effectively zero.

But as Ian Salas of Johns Hopkins, William Wascher and I pointed out in a 2014 paper, there are serious problems with the research designs and control groups of the Dube et al. study. When we let the data determine the appropriate control states, rather than just assuming—as Dube et al. do—that the bordering states are the best controls, it leads to lower teen employment. A new study by David Powell of Rand, taking the same approach but with more elegant solutions to some of the statistical challenges, yields similar results.

I think all of these cities that are raising the minimum wage to $15 an hour are going to have to discover themselves the error of their ways.  But when the jobs start disappearing and most of the protestors lose employment, they will remain as clueless about the cause of their troubles as they are today.  They will blame "greedy businessmen" instead of pandering politicians who are as ignorant of basic economics as the protesters are.