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Minimum Wages and Employment by David Neumark, William Wascher I provide this as a contrast to the EPI quote that has been circulating. Unlike the EPI, which is an organization with the stated goal of providing evidence for increased minimum wages, NBER and PPIC are a little more unbiased on the issue (PPIC even has a paper justifying higher wages in California—though the PPIC is strongly pro-California for obvious reasons). The “rather than a narrow industry” parenthetical is a specific jab at the research by Card and Krueger. Their study, cited by the EPI in the claim that “There is no evidence of job loss from previous minimum wage increases,” was restricted to minimum wage earners at fast food restaurants in a few select states. A subsequent narrow study found that the same industry had decreased advancement opportunities and employee training. As a consequence, though minimum wage went up, the total amount paid to employees didn’t change much in the long run (a greater proportion of fast food employees were making minimum wage). It’s interesting, because I doubt anyone would try to promote fast food industry labor practices as a model for emulation. There have been empirical studies on minimum wage impacts on employment for decades. The majority of them have shown that minimum wage increases have negative employment effects. This is unsurprising, as supply and demand for pricing is a fairly basic theory derived from empirical observations. The EPI does not do anything to promote discourse on this topic, ignoring any and all research that contradicts their findings. Squashed has certainly done more to contribute to a meaningful argument on minimum wage increases. His argument is, in fact, generally even stronger than that in More Than Subsistence: Minimum Wages for the Working Poor, which was quite controversial. Still, I’ll link to it because it has had notable impacts on public policy (also, I have a copy, and it is a fairly easy read). |
We review the burgeoning literature on the employment effects of minimum wages - in the United States and other countries - that was spurred by the new minimum wage research beginning in the early 1990s. Our review indicates that there is a wide range of existing estimates and, accordingly, a lack of consensus about the overall effects on low-wage employment of an increase in the minimum wage. However, the oft-stated assertion that recent research fails to support the traditional view that the minimum wage reduces the employment of low-wage workers is clearly incorrect. A sizable majority of the studies surveyed in this monograph give a relatively consistent (although not always statistically significant) indication of negative employment effects of minimum wages. In addition, among the papers we view as providing the most credible evidence, almost all point to negative employment effects, both for the United States as well as for many other countries. Two other important conclusions emerge from our review. First, we see very few - if any - studies that provide convincing evidence of positive employment effects of minimum wages, especially from those studies that focus on the broader groups (rather than a narrow industry) for which the competitive model predicts disemployment effects. Second, the studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger disemployment effects for these groups.
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