More Evidence that Minimum Wage Increases Don't Negatively Impact Employment



The Federal minimum wage is still $7.25, unchanged since 1991. Because its purchasing power has been badly eroded by inflation, some states have enacted or are considering increases, and most Democratic candidates for President support raising it nationally to $15 over varying lengths of time. Republicans argue that a higher minimum wage will lead to job losses as employers cut staff to reduce costs. There have been some contradictory studies on the issue, but new research reported at the end of September may help settle the issue.


The Federal Reserve Bank of New York just completed a study of workers in counties along the Pennsylvania [PA] - New York [NY] border [see map above]. NY had raised their minimum wage incrementally several times starting in 2013, while PA had not. The researchers wanted to find out how NY's wage increases impacted incomes and employment opportunities in the contiguous counties along the border.


In examining employment data and wages in the leisure and hospitality businesses, they found that incomes grew faster in NY after 2013 without a loss of jobs.


Liberty Street Economics, Federal Reserve Bank of New York: "Leisure and hospitality employment followed similar trends in New York and Pennsylvania before the Empire State’s minimum-wage increases ... Employment at New York leisure and hospitality businesses along the border seems to be unaffected by the phasing in of the minimum wage increases. By the fourth quarter of 2017, leisure and hospitality employment in both Pennsylvania and New York border counties had increased by 5 percent over their 2013:Q4 levels. As the minimum wage was raised to levels above $10 per hour, leisure and hospitality employment in New York counties, if anything, increased relative to businesses over the Pennsylvania state line. Concerns of diminished employment growth in New York’s leisure and hospitality industry as a result of the rising minimum wage seem not to have been borne out."
"Average weekly earnings also followed very similar trends on both sides of the border before the beginning of 2014 ... Even after the first two minimum-wage increases, there was no discernible difference in average weekly earnings between employees in the two states. However, around the start of 2016, earnings for New York employees in leisure and hospitality began to increase substantially relative to workers in Pennsylvania. This divergence in average weekly earnings has widened as the minimum wage has risen higher. By the end of 2018, leisure and hospitality workers in New York border counties earned 33 percent more, on average, than they did in late 2013, while workers in Pennsylvania border counties only received a pay increase of 15 percent over the same period. These trends suggest that the minimum-wage increases had the intended effect of boosting worker pay in low-wage industries, without negatively affecting jobs."

The researchers also examined the impact on retail workers and found no negative effect on jobs, but a smaller positive boost in wages.


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By: Don Lam & Curated Content

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