New Study: Minimum Wage Hikes Have “No Measurable Negative Impact on Employment”

Mayor Ed Murray’s Income Inequality Advisory Committee has released the two studies it commissioned on proposals to raise the minimum wage in Seattle to $15 an hour. I’ve only just skimmed through them—there’s a ton of data and analysis—but I thought it useful to skip straight to the conclusion of the report from three professors at UC Berkeley, Local Minimum Wage Laws: Impacts on Workers, Families, and Businesses:

In 1994 David Card and Alan Krueger published a groundbreaking study that changed how many economists view the minimum wage. Card and Krueger (1994) looked at employment in fast- food restaurants across the New Jersey and Pennsylvania border after New Jersey increased its state minimum wage. They found no measurable negative impact on employment. As we reviewed above, a large body of research has since built upon their methodology. As a result, we have learned a great deal about how employers respond to increases in the minimum wage.

First, paying workers more can change their work performance. It can change their productivity, their attitude about their job, how hard they work, and their ability to make it to the job on time. Second, low-wage labor markets have high levels of job churning. Turnover levels are high as workers leave jobs looking for better wages or because they are unable to stay in their jobs due to poverty-related problems such as difficulties with transportation, child care, or health. As a result, rather than eliminating jobs, raising the minimum wages can reduce turnover and increase job stability. Third, firms can absorb higher labor costs through other means as well. They can pass on some of the increased costs to consumers through higher prices or earn lower profits. In short, firms use a combination of strategies to adjust to higher minimum wages without cutting jobs or hours (Schmitt 2013).

Nonetheless, it is important to emphasize again that the existing research literature is necessarily limited to the range of minimum wage increases that have been actually been implemented. While these studies are suggestive, they cannot tell us what might occur when minimum wages are increased significantly beyond existing local, state, or federal mandates.

Finally, raising the minimum wage is not a cure-all, especially in the face of larger forces generating inequality that require national attention. Still, our assessment of the research evidence is that these policies have worked well. They raise the incomes of low-wage workers and their families. The costs to businesses are absorbed largely by reduced turnover costs and by small price increases among restaurants. Additional benefits, such as reduced spending on public assistance programs and the local stimulus of additional spending by low-income families, might also occur. But we do not yet have enough definitive research on these effects.

Seattle’s business community insists that raising the minimum wage to $15 an hour will result in the loss of hundreds of businesses and thousands of jobs. That’s what opponents claim before every proposed minimum wage hike. Yet according to the UC Berkeley report, there is no evidence that this ever happens.

Yes, the proposed Seattle hike is larger than most others (though not unprecedented), so no, we cannot know for sure that a hike to $15 won’t have a negative impact on businesses or employment. But the point is, there is nothing to suggest that it would. And so the burden of proof is on opponents to support their arguments with more than just the anecdotal empty threats of business owners who are loathe to abandon the low-wage economy to which they’ve grown accustomed.

Comments

  1. 2

    Roger Rabbit spews:

    We all know what happened to Henry Ford after he doubled his workers’ wages: He became the richest man in the world.

    And we all know what happened to Bill Gates Jr. after his little startup paid the highest wages around here: He became the richest man in the world.

    Moral of the story: You don’t get rich by making other people poor; you get rich by making other people rich or at least richer. But if you’re a stupid wingnut you don’t realize that because you don’t know how economies work.

  2. 3

    seatackled spews:

    But who are you going to trust, some California egghead professors, or a real business owner like Dave Meinert?

  3. 4

    Jenny McCarthy spews:

    “Until politicians start listening to our anecdotal evidence, which is—it’ll cost jobs, it’s going to take so many more years for employment to get better. These ‘scientists’ can study it all they want but we Mommy’s know that they need to believe us over their so-called data. What I believe in my heart is the real truth not some ‘study’.”

  4. 5

    Puddybud - The One The Only spews:

    Tell that to William Henry “Bill” Gates III, who’s little startup is now Microsoft who also said

    “So you have to be a bit careful: If you raise the minimum wage, you’re encouraging labor substitution, and you’re going to go buy machines and automate things — or cause jobs to appear outside of that jurisdiction.

    And so within certain limits, you know, it does cause job destruction. If you really start pushing it, then you’re just making a huge tradeoff.”

    Yet on PMSNBC they will find any fool like the National Employment Law Project’s Tsedeye Gebreselassie to say Bill Gates III is wrong. Did Roger Idiot Wabbit agree with Tsedeye Gebreselassie AND THAT’S WHY our Resident Idiot Wabbit is so stoooooooooooopid with facts lately? Old Age?

    And Bill Gates III Bridge Pal Warrenn Buffet said

    “If you could have a minimum wage of $15 and it didn’t hurt anything else, I would love it,” he said. “But clearly that isn’t the case.”

    Or the CBO’s own study which Puddy posted many times on HA DUMMOCRETINS!

    So Puddy asks this of HA DUMMOCRETINS. Why do you want $15/hour here in Seattle but buy products from companies like Apple who employes Foxconn who puts their employees through horrible conditions? Have you HA DUMMOCRETINS no shame?

    So two of the world’s richest men disagree with Ed Murray’s “study”!

    Remember no law, no condition, no action ever applies to HA DUMMOCRETINS!

  5. 6

    Travis Bickle spews:

    Minimum Wages and Employment: A Case Study of the
    Fast-Food Industry in New Jersey and Pennsylvania: Comment

    Page 1362, year 2000, The American Economic Review, same journal as that in which the Card and Krueger paper appeared six years earlier.

    Written by economists from UC Irvine and the Fed.

    Quite the opposite conclusions when the Card and Krueger data was subject to re-analysis.

    Card and Krueger studied fast-food employment in two states, two decades ago. They looked at employment in chain restaurants, with all of those economies of scale that larger businesses enjoy, not in the small businesses that employ most private-sector workers.

  6. 7

    czechsaaz spews:

    @5

    Appeal to the anecdote from authority, eh? See @4.

    Bill, got any empirical data to prove that economic theory?

    Well what should I expect, Piddles still thinks Reaganomics is a success.

    Quick question, if the minimum wage stays the same or even drops in Seattle will Apple stop making products at slave wage levels through Foxconn? (C’mon, you know the answer.) Will more people who work in Seattle be able to afford a $99 iPhone C? (C’mon, you know the answer.) What will be the effect on sales tax revenue in the city of Seattle if more people go out and buy an iPod nano At the downtown or U.Village Apple store? What will be the net effect on Apple’s profitability? What will the realized profit mean for shareholders? (C’mon, you know the answer.)

    (Cue Piddles claiming people who make minimum wage should make better choices and not have modern communications tools…5…4…3…)

  7. 8

    czechsaaz spews:

    @6

    Mudede had a summary of the last time the state of Washington upped the minimum wage by 85%

    And here’s those commies over at Bloomberg from just a few days ago looking at Washington from 198 to present

    When Washington residents voted in 1998 to raise the state’s minimum wage and link it to the cost of living, opponents warned the measure would be a job-killer. The prediction hasn’t been borne out.

    In the 15 years that followed, the state’s minimum wage climbed to $9.32 — the highest in the country. Meanwhile job growth continued at an average 0.8 percent annual pace, 0.3 percentage point above the national rate. Payrolls at Washington’s restaurants and bars, portrayed as particularly vulnerable to higher wage costs, expanded by 21 percent. Poverty has trailed the U.S. level for at least seven years.

  8. 10

    Roger Rabbit spews:

    @3 Henry Ford and Bill Gates are real business owners. Who the hell is Dave Meinert? I’ve never heard of him.

  9. 11

    Roger Rabbit spews:

    @5 This from a guy who paid six-figure salaries and gave stock options worth millions to his employees … it would seem Gates doesn’t have much actual experience with the minimum wage.

  10. 12

    Roger Rabbit spews:

    Minimum wage is an ideological issue, not an economic issue. Conservative assertions about minimum wage killing jobs are no more true than their claims that Social Security is broke or that the world is 6,000 years old. Their nonsensical positions are faith-based, not reality-based. We not only shouldn’t negotiate with these people, we shouldn’t talk to them. They’re nuts. They belong in straitjackets and rubber rooms. We should have no truck with them whatsoever.

  11. 13

    Ekim spews:

    RR @12
    And they all should be paid no more than the less than minimum wage salaries they hold so dear.

  12. 14

    N in Seattle spews:

    RR @11 (emphasis added):

    @5 This from a guy who paid six-figure salaries and gave stock options worth millions to his employees … it would seem Gates doesn’t have much actual experience with the minimum wage.

    About as much experience as he has with public schools. That is — ZERO.

    Side note to the character calling itself Puddybud (@5) — anecdote from two extremely rich guys is still just anecdote.

  13. 15

    Puddybud - The One The Only spews:

    Side note to the character calling itself Puddybud (@5) — anecdote from two extremely rich guys is still just anecdote.

    So sad these HA DUMMOCRETIN arguments. Two people who built themselves to be $Multi-Billionaires and their commentary is worthless?

    HA DUMMOCRETINS, such morons!

  14. 16

    Puddybud - The One The Only spews:

    Will more people who work in Seattle be able to afford a $99 iPhone C?

    Seems most peiople in Seattle already own those iPhones. They acquire them through their plans. R U really this stooooooooopid checkmate? The iPhone is the razor and the plan is the razor blades. They pay for the phone with their two year plans! If the HA DUMMOCRETINS would accurately ask this question, Puddy bets most made their acquisitions by their 2 year plans!

    will Apple stop making products at slave wage levels through Foxconn?

    If the masses get off their asses and protest Apple like the OWS Racist Fraggy types did in their OWS demonstrations! Then Apple would wake up and move their manufacturing elsewhere. Why aren’t HA DUMMOCRETINS demanding Apple build the iCrap in WA State? Then there would be good paying jobs way over $15/hour.

    Sadly, Puddy doesn’t hear and hue and cry over that! Why not HA DUMMOCRETINS?

    See ya! Another “financial conspiracy myth” deeeeeestroyed!