This article is from the libertarian Reason.com. They’re terrible at social issues, but really really good at economics.
Raising the minimum wage like this is an idea that’s become increasingly common amongst more liberal Democratic politicians and policymakers: The city of Seattle, Washington passed a law raising its minimum wage to $15 last year, and the Los Angeles city council voted to follow suit. Soon after, New York state announced a plan to raise the minimum wage of all fast food workers to $15, and the state’s governor, Andrew Cuomo, recently said he believes it should apply to all workers.
Many of these plans start from the assumption, implicitly or explicitly, that these minimum wage hikes would be relatively cost-free, pointing to several studies seeming to show that increases in the minimum wage don’t have much effect on jobs.
Here is what the author of some of the most influential of those studies, former Obama administration economic adviser Alan B. Krueger, had to say about raising the federal minimum wage to $15 an hour in an op-ed for The New York Times last week:
15 an hour is beyond international experience, and could well be counterproductive. Although some high-wage cities and states could probably absorb a $15-an-hour minimum wage with little or no job loss, it is far from clear that the same could be said for every state, city and town in the United States.
Krueger goes on to warn of greater risk, and the potential for “severe” trade-offs, if policymakers pursue a $15 minimum wage, warning that it would go beyond what any research supports. Ultimately, he concludes, it is “a risk not worth taking.”
Krueger wasn’t disowning his own work or abandoning his position. He still supports raising the minimum wage to $12 an hour over a period of years, which he thinks could be done with essentially no job loss.
There are some reasons to be skeptical of that claim too: The Congressional Budget Office, which generally tries to take a moderate approach to economic evidence and put its estimates right in the middle of the consensus range, found that even a more modest hike to $10.10 an hour nationally would most likely cost about a half a million jobs, and while it’s possible such a raise might produce minimal job loss, it’s equally possible that it would cost a million jobs.
Overall, as David Neumark and William Wascher have found, the bulk of the evidence from research into the minimum wage suggests that hikes tend to decrease employment.
Let’s review the facts on minimum wage.
Abstract from a National Bureau of Economic Research study:
We estimate the minimum wage’s effects on low-skilled workers’ employment and income trajectories. Our approach exploits two dimensions of the data we analyze. First, we compare workers in states that were bound by recent increases in the federal minimum wage to workers in states that were not. Second, we use 12 months of baseline data to divide low-skilled workers into a “target” group, whose baseline wage rates were directly affected, and a “within-state control” group with slightly higher baseline wage rates. Over three subsequent years, we find that binding minimum wage increases had significant, negative effects on the employment and income growth of targeted workers.
[…]Over the late 2000s, the average effective minimum wage rose by 30 percent across the United States. We estimate that these minimum wage increases reduced the national employment-to-population ratio by 0.7 percentage point.
That comes out to 1.4 million workers who lost their jobs, thanks to minimum wage mandates. And those are primarily young, unskilled workers who are affected – people trying to get a start in the workplace and build their resumes, so they can move up.
Harvard economist Greg Mankiw explains the top 14 views that a majority professional economists agree on, and here’s #12:
12. A minimum wage increases unemployment among young and unskilled workers. (79%)
This is not controversial. This is the kind of basic “how America works” economics stuff that people used to learn in their civics classes before the schools became so politicized.