Comprehensive Study of Minimum Wage Increases in Six Cities Finds No Negative Impact on Employment
Conservatives and progressives have been arguing about the impact of minimum wage increases since, at least, I was an undergraduate student in economics in the late 70s. There is quite a bit of research being done on the question today because progressive politicians like Sen. Bernie Sanders support a large jump to $15.00 nationally, and a number of cities have already raised their minimum wage. Conservatives argue that while increases help some workers, they lead to job losses and reduced hours for others. However, recent research and economic theory suggests that you can increase wages without negatively impacting employment. Economist, Dr. Sylvia Allegretto explains how that works:
Center on Wage and Employment Dynamics, Berkeley University: "Other adjustment channels increase demand for workers. For example, higher wages reduce employee turnover, thereby cutting employers’ recruitment and retention costs and increasing workers’ tenure and experience. Positive employment effects can also arise when higher minimum wages draw working age adults into the labor force or induce them to increase their hours. If product demand is inelastic, higher product prices can provide a channel to pass on higher wage costs to consumers. Higher wages can also stimulate consumer demand and job creation. Models that incorporate all these channels of adjustment suggest that a minimum wage’s effect on employment can be positive or negative."
In a recent study, Dr. Allegretto along with Dr. Anna Godoey and Dr. Carl Nadler and Professor Michael Reich at UC Berkeley examined minimum wage increases in six cities Chicago, District of Columbia, Oakland, San Francisco, San Jose and Seattle. By the end of 2016 each city had increased its minimum wage above $10 and two, San Francisco and Seattle, had reached $13. Their study evaluated employee wage gains and job losses in those cities, and their findings were reported in September in an article titled, "The New Wave of Local Minimum Wage Policies: Evidence from Six Cities."
Their research focused on employees in the food service industry where many minimum wage workers find employment. They found that workers realized wage increases without harming employment in those cities.
Study Results: "On average across the six cities, we find that a 10 percent increase in the minimum wage increases earnings in the food services industry between 1.3 and 2.5 percent. "
"We cannot detect significant negative employment effects. Our models estimate employment effects of a 10 percent increase in the minimum wage that range from a 0.3 percent decrease to a 1.1 percent increase, on average."
The authors caution that their findings only track increases to $13 and that additional research will be needed as more cities increase their minimum wage to $15.
Study: We will revisit these and other localities’ minimum wage policies, which in many cases will reach $15, as they become more fully implemented.
This study is unlikely to end the debate among politicians and economists, but it's the most rigorous and comprehensive thus far and may well encourage other cities to consider increases.
By: Don Lam & Curated Content