Minimum wage increases result in job loss, UCI-led study reaffirms
Minimum wage increases result in job loss, UCI-led study reaffirms
- December 16, 2014
- Work challenges recent research claiming otherwise
No matter which way you slice it – or in this case, inflate it – minimum wage increases
result in long-term job loss, according to David Neumark, UC Irvine Chancellor’s Professor
of economics. That’s the finding of a study published last week in the IZA Journal of Labor Policy.
“There has been a continuing trickle of studies claiming that a higher minimum wage
may not cause job loss, which have provided fodder to policymakers and others seeking
increases,” Neumark said. “But our new evidence directly addresses this claim and
shows that it is simply not true. Higher minimum wages do destroy jobs.”
Co-authors are J.M. Ian Salas, research fellow at the Harvard Center for Population
& Development Studies and a 2013 UCI Ph.D. graduate, and William Wascher, economist
with the Board of Governors of the Federal Reserve System in Washington, D.C. The
finding is consistent with that of their previously published work, summarized in
the 2008 book Minimum Wages.
The new study addresses the current dispute about comparison groups used to estimate
the effects of past minimum wage increases – an ongoing challenge in evaluating any
policy because researchers cannot observe the same economy with and without the policy,
Neumark noted.
Recent work has contested the use of broad U.S. comparisons that measure employment
changes in states with minimum wage increases versus those without, arguing that only
adjacent states or counties should be used as comparisons. When the parameters were
narrowed in this way to adjust for what would have happened had the minimum wage not
gone up, researchers assert, there was no net decrease in employment.
“These studies raise a good question: What do you use as a comparison or proxy group
for states where the minimum wage increased?” Neumark said. “It turns out that it
doesn’t matter.”
His new analysis shows that when gauging the effects of minimum wage hikes with either
comparison method – one restricted by proximity or one taking a broader view – the
evidence consistently points to net job loss over a span of one to two years.
“There are a lot of strong opinions about low wages and how much employers should
pay workers. But we have to separate our feelings about low wages from the evidence
on the effects of the government simply requiring employers to pay higher wages,”
Neumark said.
“The data and the evidence tell us that a higher minimum wage results in job loss
for low-skilled workers. We may be willing to accept that job loss in return for other
benefits of higher wages for some workers, but we can’t pretend there will be no lost
jobs.”
View the study online at http://www.izajolp.com/content/pdf/2193-9004-3-24.pdf.
-Heather Ashbach, Social Sciences Communications
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