New study: minimum wage hikes hurt low-skill workers during last recession

The American Enterprise Institute reports. (H/T Jay Richards tweet)

Higher unemployment:

A new NBER working paper from Jeffrey Clemens and Michael Wither of the University of California, San Diego, suggests that the 30% increase in the average effective minimum wage over the late 2000s “reduced the national employment-to-population ratio — the share of adults with any kind of job — by 0.7 percentage point” between December 2006 and December 2012.

That works out to 14% of the total working-age decline during that period. Clemens and Wither basically looked at what happened to workers in states that were affected by federal minimum wage hikes versus what happened in states that weren’t. They also adjusted for the differing state-level impact of the Great Recession.

Low-skill workers hurt the most:

Now what’s particularly interesting in what Clemens and Wither found is that the minimum wage hikes made it harder for low-income workers to climb the ladder. From “The Minimum Wage and the Great Recession: Evidence of Effects on the Employment and Income Trajectories of Low-Skilled Workers“:

 … we find that binding minimum wage increases had significant, negative effects on the employment and income growth of targeted workers. Lost income reflects contributions from employment declines, increased probabilities of working without pay (i.e., an “internship” effect), and lost wage growth associated with reductions in experience accumulation….

We also present evidence of the minimum wage’s effects on low-skilled workers’ economic mobility. We find that binding minimum wage increases significantly reduced the likelihood that low-skilled workers rose to what we characterize as lower middle class earnings. This curtailment of transitions into lower middle class earnings began to emerge roughly one year following initial declines in low wage employment. Reductions in upward mobility thus appear to follow reductions in access to opportunities for accumulating work experience.

But this paper is one of several recently that have outlined the negative employment effect of minimum wage hikes. In “More on Recent Evidence on the Effects of Minimum Wages in the United States,” researchers David Neumark, J.M. Ian Salas, William Wascher conclude “the best evidence still points to job loss from minimum wages for very low-skilled workers – in particular, for teens.”

And the nonpartisan Congressional Budget Office find that a $10.10 federal minimum wage option would reduce total employment by about 500,000 workers, or 0.3 percent” in 2016.

So that’s 3 studies from 3 different sources, that all agree that raising the minimum wage will definitely cost jobs. The real minimum wage is, of course, zero. That’s what you get paid when your employer can’t afford to pay you what government tells them to pay you.

2 thoughts on “New study: minimum wage hikes hurt low-skill workers during last recession”

  1. This is really true. People don’t listen of course, but they need to stop and ask, has this ever benefited the people we’re seeking to help? The answer is a resounding no. Every time we raise the minimum wage, we also raise the cost of goods, cut back on people’s hours. and the number of available jobs. This trickles down to making poor people worse off. Something else many don’t seem to understand, the working class poor often qualify for some government subsidies, things like food stamps, rental assistance, medical. Raise their wages on paper and they no longer qualify for benefits. They also slip into a higher tax bracket. Now they have less, not more.

    At the end of the day, all this compassion for the poor, often leaves them with no gov benefits, smaller paychecks after taxes, reduced hours, and more expensive goods to purchase.

    Like

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