Difference between revisions of "Myths/raising the minimum wage hurts jobs"
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| − | There is a | + | [[category:minimum wage]] |
| + | [[category:unemployment]] | ||
| + | {{hdr/myth|Raising the minimum wage will result in higher unemployment rates.}} | ||
| + | [[File:Hanauer on minimum wage.jpeg|thumb|Billionaire Nick Hanauer was one of the original investors in Amazon.com.]] | ||
| + | ==Myth== | ||
| + | There is a widespread belief that raising the {{l/ip|minimum wage}} leads to loss of jobs and higher unemployment. (A more extreme version also holds that eliminating the minimum wage completely would lead to more employment.) | ||
| + | ===Examples=== | ||
| + | * '''The {{l/sub|San Francisco}} claim''': San Francisco suffered job losses after citizens approved a ballot proposal to raise the city’s minimum wage to $15 an hour by 2018. | ||
| + | * '''The {{l/sub|Boehner}} argument''': "When you raise the price of employment, guess what happens? You get less of it. Why would we want to make it harder for small employers to hire people?" — [[John Boehner]] | ||
| + | ==Reality== | ||
| + | There are (at least) two parts to the reality of this myth: | ||
| + | * It misses the point. | ||
| + | * It's not even true. | ||
| + | ===Missing the Point=== | ||
| + | The point of employment as a social institution is twofold: | ||
| + | * to keep society operating, i.e. provide all the goods and services necessary for everyone to live at an acceptable level | ||
| + | * to distribute those goods and services in a reasonably equitable way | ||
| + | When a worker's wages fall below the level necessary to provide them with a reasonable living, then this arrangement fails on both counts. | ||
| + | ===Not Even True=== | ||
The most pessimistic credible study I could find comes from the Congressional Budget Office, which [[issuepedia:2014/02/The Effects of a Minimum-Wage Increase on Employment and Family Income|concluded in February 2014]] that increasing the minimum wage would have two primary effects on low-wage workers: | The most pessimistic credible study I could find comes from the Congressional Budget Office, which [[issuepedia:2014/02/The Effects of a Minimum-Wage Increase on Employment and Family Income|concluded in February 2014]] that increasing the minimum wage would have two primary effects on low-wage workers: | ||
# most would receive higher pay, which would elevate some of them above the poverty level | # most would receive higher pay, which would elevate some of them above the poverty level | ||
| Line 11: | Line 29: | ||
More significantly, it appears that the CBO model may be too pessimistic: | More significantly, it appears that the CBO model may be too pessimistic: | ||
* San Jose [[issuepedia:2014/05/01/One Year Later, Here's What San Jose Looks Like After Raising the Minimum Wage|raised their minimum wage in 2013]], resulting in a ''decrease'' in unemployment and many other benefits to the local economy. | * San Jose [[issuepedia:2014/05/01/One Year Later, Here's What San Jose Looks Like After Raising the Minimum Wage|raised their minimum wage in 2013]], resulting in a ''decrease'' in unemployment and many other benefits to the local economy. | ||
| + | * Washington state, which has the highest state-mandated minimum wage, also has the lowest unemployment.<ref name=ibtimes /> | ||
* The US Department of Labor [http://www.dol.gov/minwage/mythbuster.htm says] that "A review of 64 studies on minimum wage increases found no discernable effect on employment. Additionally, more than 600 economists, seven of them Nobel Prize winners in economics, have signed onto a letter in support of raising the minimum wage to $10.10 by 2016." | * The US Department of Labor [http://www.dol.gov/minwage/mythbuster.htm says] that "A review of 64 studies on minimum wage increases found no discernable effect on employment. Additionally, more than 600 economists, seven of them Nobel Prize winners in economics, have signed onto a letter in support of raising the minimum wage to $10.10 by 2016." | ||
* A comparative study of states that raised their minimum wages to be higher than that of their neighbors found [http://www.eoionline.org/issues/minimum-wage/was-minimum-wage-helps-workers-doesnt-hurt-business/ no movement of jobs] from the former to the latter | * A comparative study of states that raised their minimum wages to be higher than that of their neighbors found [http://www.eoionline.org/issues/minimum-wage/was-minimum-wage-helps-workers-doesnt-hurt-business/ no movement of jobs] from the former to the latter | ||
| + | ==Summary== | ||
| + | While there is plenty of debate on this subject, all the real evidence supports one side of it: '''raising the minimum wage doesn't have any clear effect on the employment rate'''<ref name=wapo /> and in some cases may even increase employment<ref name=inc />. | ||
| + | ==Related== | ||
| + | There is a claim that the [[wikipedia:Difference_in_differences#Card_.26_Krueger_.281994.29_example|Card-Krueger study]] – which claimed to show an increase in employment after a minimum wage hike – was actually poorly conducted because it relied on employers' verbal statements rather than actually checking the employment records. "payroll records did not corroborate the verbal assertions made by employers."<ref name=elder /> Whether or not that is true, however, a follow-up study confirmed Card and Krueger's findings.<ref name=BJIR /> | ||
| + | ==Footnotes== | ||
| + | <references> | ||
| − | + | <ref name=ibtimes>'''2014-03-15''' [http://www.ibtimes.com/minimum-wage-washington-after-16-years-state-highest-minimum-wage-maintains-lower-unemployment Minimum Wage In Washington: After 16 Years, State With Highest Minimum Wage Maintains Lower Unemployment Than National, Regional Averages.]</ref> | |
| − | = | + | |
| − | + | <ref name=wapo>'''2014-01-08''' [http://www.washingtonpost.com/blogs/govbeat/wp/2014/01/08/raising-minimum-wage-doesnt-seem-to-affect-employment-in-3-charts-and-2-mcdonalds-meals/ Raising minimum wage doesn’t affect employment, in 3 charts (and 2 McDonald’s meals)]</ref> | |
| − | + | ||
| − | + | <ref name=elder>'''2014-10-16''' [http://www.elderstatement.com/2014/10/if-minimum-wage-is-so-great-why-cite.html?spref=tw&m=1 If Minimum Wage Is So Great, Why Cite Bogus Study?] claims that the PA/NJ study was refuted by a follow-up study, but does not cite any sources. Also makes a lot of other bogus arguments.</ref> | |
| − | = | + | |
| − | + | <ref name=BJIR>'''2009-06''' [http://www.ingentaconnect.com/content/bpl/bjir/2009/00000047/00000002/art00011 Publication Selection Bias in Minimum-Wage Research? A Meta-Regression Analysis] (paywalled) ''British Journal of Industrial Relations'', Volume 47, Number 2</ref> | |
| + | |||
| + | <ref name=inc>'''2015-08-13''' [http://www.inc.com/erik-sherman/cutting-through-the-hype-over-minimum-wage-increases.html Cutting Through the Hype Over Minimum Wage Increases] "... In short, when you look at the data closely enough, you could see it as easily argues that a higher minimum wage actually increased the number of jobs." ... "... similar data for San Francisco showed an increase in restaurant jobs after an increase in minimum wage."</ref> | ||
| + | |||
| + | </references> | ||
Latest revision as of 00:21, 27 October 2015
| Myth: Raising the minimum wage will result in higher unemployment rates. |
Myth
There is a widespread belief that raising the minimum wage leads to loss of jobs and higher unemployment. (A more extreme version also holds that eliminating the minimum wage completely would lead to more employment.)
Examples
- The San Francisco claim: San Francisco suffered job losses after citizens approved a ballot proposal to raise the city’s minimum wage to $15 an hour by 2018.
- The Boehner argument: "When you raise the price of employment, guess what happens? You get less of it. Why would we want to make it harder for small employers to hire people?" — John Boehner
Reality
There are (at least) two parts to the reality of this myth:
- It misses the point.
- It's not even true.
Missing the Point
The point of employment as a social institution is twofold:
- to keep society operating, i.e. provide all the goods and services necessary for everyone to live at an acceptable level
- to distribute those goods and services in a reasonably equitable way
When a worker's wages fall below the level necessary to provide them with a reasonable living, then this arrangement fails on both counts.
Not Even True
The most pessimistic credible study I could find comes from the Congressional Budget Office, which concluded in February 2014 that increasing the minimum wage would have two primary effects on low-wage workers:
- most would receive higher pay, which would elevate some of them above the poverty level
- some jobs would probably be eliminated
It should be noted that the minimum wage, which (as of 2014) has not been raised or even adjusted for inflation since 2007, is not adequate to keep most workers out of poverty. They therefore rely either on government assistance or on working multiple jobs, which is unhealthy for the worker, increases strain on families, and decreases the job supply.
In other words, a job that doesn't pay enough to live on isn't really worth having.
More significantly, it appears that the CBO model may be too pessimistic:
- San Jose raised their minimum wage in 2013, resulting in a decrease in unemployment and many other benefits to the local economy.
- Washington state, which has the highest state-mandated minimum wage, also has the lowest unemployment.[1]
- The US Department of Labor says that "A review of 64 studies on minimum wage increases found no discernable effect on employment. Additionally, more than 600 economists, seven of them Nobel Prize winners in economics, have signed onto a letter in support of raising the minimum wage to $10.10 by 2016."
- A comparative study of states that raised their minimum wages to be higher than that of their neighbors found no movement of jobs from the former to the latter
Summary
While there is plenty of debate on this subject, all the real evidence supports one side of it: raising the minimum wage doesn't have any clear effect on the employment rate[2] and in some cases may even increase employment[3].
Related
There is a claim that the Card-Krueger study – which claimed to show an increase in employment after a minimum wage hike – was actually poorly conducted because it relied on employers' verbal statements rather than actually checking the employment records. "payroll records did not corroborate the verbal assertions made by employers."[4] Whether or not that is true, however, a follow-up study confirmed Card and Krueger's findings.[5]
Footnotes
- ↑ 2014-03-15 Minimum Wage In Washington: After 16 Years, State With Highest Minimum Wage Maintains Lower Unemployment Than National, Regional Averages.
- ↑ 2014-01-08 Raising minimum wage doesn’t affect employment, in 3 charts (and 2 McDonald’s meals)
- ↑ 2015-08-13 Cutting Through the Hype Over Minimum Wage Increases "... In short, when you look at the data closely enough, you could see it as easily argues that a higher minimum wage actually increased the number of jobs." ... "... similar data for San Francisco showed an increase in restaurant jobs after an increase in minimum wage."
- ↑ 2014-10-16 If Minimum Wage Is So Great, Why Cite Bogus Study? claims that the PA/NJ study was refuted by a follow-up study, but does not cite any sources. Also makes a lot of other bogus arguments.
- ↑ 2009-06 Publication Selection Bias in Minimum-Wage Research? A Meta-Regression Analysis (paywalled) British Journal of Industrial Relations, Volume 47, Number 2