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