New Research Finds that Minimum Wage Hikes Don't Negatively Impact the Job Market

Conservative opposition to a minimum wage increase is based, they say, on its negative impact on the job market. They argue that companies will hire fewer workers if they have to pay them more. While there is some logic to that argument, economists understand that there is a countervailing effect which tends to increase employment. When workers are paid more they purchase more, creating greater demand for goods and services in the economy. Greater demand increases pressure on employers to hire more workers. The question has always been which impact outweighs the other.

We have documented [see here and here] various studies over the last two years and each has found that the conflicting effects of minimum wage increases tend to cancel each other out, resulting in no net job losses, while raising many individuals and families out of poverty.

A report published by the United Kingdom in 2019 came to the same conclusion.

Gov.UK: "The report finds that, overall, the most up to date body of research from US, UK and other developed countries points to a very muted effect of minimum wages on employment, while significantly increasing the earnings of low paid workers. Importantly, this was found to be the case even for the most recent ambitious policies [large minimum wage increases]."

And yesterday, economists at the University of Massachusetts Amherst and University College London published the results of a new minimum wage study with similar results.

UMASS, Amherst: "Economists at the University of Massachusetts Amherst along with colleagues from University College London and the Economic Policy Institute have found that the overall number of low-wage jobs remained essentially unchanged over the five years following increases to the minimum wage, and that affected low-wage workers overall saw a wage gain of 7 percent after a minimum wage increase. These spillovers extended up to $3 above the minimum wage and represent around 40 percent of the overall wage increase from minimum wage changes."

Marketwatch: "The researchers studied 172 state-level minimum wage increases that took place from 1979 to 2019. Using demographic data from the U.S. Census Bureau’s Current Population Survey, they created a subgroup that captured outcomes for 75% of all minimum wage workers."

"They found “no indication” that minimum wage has a negative effect on the overall unemployment rate, labor-force participation rate, or on overall labor-market transitions."

These studies provide President Joe Biden and Treasury Secretary Janet Yellen with powerful evidence to support the inclusion of a $15.00 minimum wage in their Covid Relief legislation.

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By: Don Lam & Curated Content