Fox's Stossel Ignores Evidence To Rail Against Minimum Wage

››› ››› MIKE BURNS

During a one-hour special on Fox News, John Stossel attacked the minimum wage, claiming that it is responsible for unemployment both among teenagers and the overall labor force. In fact, studies have found that recent increases in the minimum wage have not increased teen unemployment or overall unemployment.

Stossel Falsely Blames Teenage Unemployment On Minimum Wage

Stossel: "Low Wage Jobs Used To Be A Way For Kids And The Unskilled To Get Into The Labor Force." From Stossel's December 30 Fox News special titled Politicians' Top 10 Promises Gone Wrong:

STOSSEL: Low wage jobs used to be a way for kids and the unskilled to get into the labor force, to prove themselves. Most every gas station used to offer free window cleaning. Not anymore. The construction industry used to be a place teens could get a foot in the door, learn the discipline of regular work. But the minimum wage left many teens out of jobs. [Fox News Special, 12/30/10]

EPI: "The Warnings Of Massive Teen Job Loss Due To Minimum Wage Increases Simply Do Not Comport With The Evidence." In a November 25, 2009, post, the Economic Policy Institute stated:

First, the labor market is in a severe downturn that is affecting essentially all groups. Since the recession started in December 2007, the overall employment rate has fallen from 62.7% to 58.5%, including a decline of 0.9 percentage points since July alone. Figure A shows the overall employment rate, along with the teen employment rate. Both the overall rate and the teen rate have experienced steep declines during the current downturn. The teen rate, however, has fallen farther, as the plot shows is always the case in recessions (recessions are shaded). Teen workers occupy the "last hired, first fired" rung on the job ladder, and their employment is hit much harder during downturns than that of older workers.


Figure B illustrates this further--it shows teen employment as a percent of total employment over time. Because teens are hit harder by downturns than older workers, their share of total employment drops during recessions (and, for the recessions of 1990 and 2001, during the period of joblessness that followed them). A quick examination of the plot reveals that far from being an aberration, the decline in the teen share of employment over the last two years is right in line with what would be expected given the length and severity of the current downturn in the labor market.


Instead, Figure B illustrates how teen employment is driven far more by larger labor market employment trends than by any effects of minimum wage changes. The black lines in Figure B mark times when Congress increased the minimum wage to keep up with inflation. The two-step increase in 1990 and 1991 occurred during a period of deterioration in the labor market, and the teen employment share dropped. The two-step increase in 1996 and 1997 occurred during a strong labor market, and the teen employment share increased. The three-step increase in 2007, 2008, and 2009 occurred during a weak labor market, and the teen employment share fell.

This observation is consistent with what careful empirical studies have found. While it is true that there is some disagreement among economists about whether increasing the minimum wage increases or decreases employment, there is a consensus on the essential point: the impact of a minimum wage raise on jobs, whether positive or negative, is small. The warnings of massive teen job loss due to minimum wage increases simply do not comport with the evidence. [, 11/25/09]

Institute For Research On Labor And Employment: Even During Periods Of High Unemployment, Minimum Wage Increases Have Not Led To Higher Teenage Unemployment Rate. A June 2010 report by University of California-Berkeley's Institute for Research on Labor and Employment stated:

Some observers maintained that teen unemployment would increase because of the timing of these minimum wage increases. Teen unemployment rates did indeed increase throughout 2008 and 2009. But was this increase in teen unemployment a result of minimum wage increases during an especially severe economic downturn?

More generally, are the disemployment effects of minimum wage for teens more pronounced (or at least present) when the labor market is slack? To the extent the measured employment effects are small for monopsonistic reasons, some firms are labor supply constrained as opposed to labor demand constrained. But this is less likely to be the case when the unemployment rate is high and the job vacancy rate is low. There may be other possibilities as well, including a greater consumer demand effect from an increase in minimum wages during a recession.


Overall, the results do not indicate heterogeneous impacts of minimum wages depending on the overall rate of unemployment. Within the range of variation in the minimum wage and overall unemployment rates in our sample, the effects do not seem to vary across phases of the business cycle or across labor markets with differing labor market tightness. [IRLE, 6/21/10]

BLS: Roughly Three-Quarters Of Minimum Wage Earners Are 20 Or Older. According to March 2010 BLS data 51.2 percent of workers at or below the minimum wage are 25 years or older and 25.7 percent of workers at or below the minimum wage are 20 to 24 years old, meaning that more than 75 percent of people making minimum wage or less are older than teenagers. [, 3/1/10]

National Employment Law Project: Most Minimum Wage Earners Are Adults, Not Teenagers. In a December 26 Register-Guard op-ed, the National Employment Law Project's (NELP) Anne Thompson wrote: "Even the claim that the minimum wage only affects teenagers looking for pocket change does not hold up. Most minimum wage earners are adults, many of whom support families on this income. Nationwide, three-quarters of minimum wage earners are 20 or older." [The Register-Guard, 12/26/10]

Stossel Suggests Increasing Minimum Wage Kills Jobs

Stossel: Minimum Wage Increase Leads To Higher Unemployment Rate. Throughout the segment, Stossel repeatedly suggested that increasing the minimum wage raises the unemployment rate:

STOSSEL: But the minimum wage left many teens out of jobs. No wonder teen unemployment is 26 percent.

WARREN MEYERS: If they were to get rid of the minimum wage we could easily hire more people.

STOSSEL: Warren Meyers manages public parks. When the minimum wage went up he replaced workers with machines.


STOSSEL: Fewer people, more unemployment. In fact, unemployment has risen more in states that raised their minimum wage.


STOSSEL: Economist Russ Roberts points out setting minimums has unintended consequences.

PROF. RUSS ROBERTS (GEORGE MASON UNIVERSITY): What could be more cruel than to raise your wage artificially, and now you have no wage.

STOSSEL: Higher unemployment thanks to government's good intentions.

[Fox News Special, 12/30/10]

IRLE Study Found "No Detectable Employment Losses From The Kind Of Minimum Wage Increases We Have Seen In The United States." According to a 2010 Institute for Research on Labor and Employment study:

For cross-state contiguous counties, we find strong earnings effects and no employment effects on minimum wage increases. By generalizing the local case studies, we show that the differences in the estimated elasticities in the two sets of studies result from insufficient controls for unobserved heterogeneity in employment growth in the national-level studies using a traditional fixed-effects specification. The differences do not arise from other possible factors, such as using short before-after windows in local case studies.

The large negative elasticies in the traditional specification are generated primarily by regional and local differences in employment trends that are unrelated to minimum wage policies. This point is supported by our finding that neighborhood-level placebo minimum wages are negatively associated with employment in counties with identical minimum wage profiles. Our local specification performs better in a number of tests of internal validity. Unlike traditional fixed-effects specification, it does not have spurious negative (or positive) preexisting trends and is robust to the inclusion of state-level time trends as added controls.

How should one interpret the magnitude of the difference between the local and national estimates? The national-level estimates suggest a labor demand elasticity close to -1. This implies that an increase in the minimum wage has a very small impact on the total income earned by affected workers. In other words, these estimates suggest that the policy is not useful for raising the earnings of low-wage workers, as the disemployment effect annuls the wage effect for those who are still working. However, statistical bounds (at the 95% confidence level) around our contiguous county estimates of the labor demand elasticity as identified from a change in the minimum wage rule out anything above -0.48 in magnitude. This result suggests that minimum wage increases do raise the overall earnings at these jobs, although there may be differential effects by demographic groups due to labor-labor substitution.


These caveats notwithstanding, our results explain the sometimes conflicting results in the existing minimum wage literature. For the range of minimum wage increases over the past several decades, methodologies using local comparisons provide more reliable estimates by controlling for heterogeneity in employment growth. These estimates suggest no detectable employment losses from the kind of minimum wage increases we have seen in the United States. Our analysis highlights the importance of accounting for such heterogeneity in future work on this topic. [IRLE, November 2010]

IRLE: "No Discernable Disemployment Effect, Even When Minimum Wage Increases Lead To Relatively Large Wage Changes." According to a 2009 Institute for Research on Labor and Employment study: "We also find no relationship between the minimum wage elasticity of overall teen wages and the elasticity of employment across the 74 commuting zones. This result provides further evidence that there is no discernable disemployment effect, even when minimum wage increases lead to relatively large wage changes." [IRLE, 6/25/09]

EPI: Lowering Minimum Wage Would Not Boost Employment. In a July 2010 post, the Economic Policy Institute reported:

Lately, opponents of the minimum wage have suggested that decreasing it would help to boost employment. This is a terrible idea for a variety of reasons. First, the minimum wage is not high by historical standards - today, the real value of the minimum wage is less than what it was from 1961 to 1981. Second, research on the disemployment effects of the minimum wage give mixed results - many indicate that a small change to the minimum wage would have no impact on employment. Furthermore, even if there is a disemployment effect, it is small and far outweighed by the fact that low-wage workers on average will see a net benefit from most minimum wage increases (Shierholz 2009). Finally, one of the biggest problems during a recession is the decrease in consumer demand - when consumers cut back on spending, employers respond by cutting back on jobs. Reducing the wages of already low-wage workers will only make this problem worse, and will hurt those who are least well off. [EPI, 7/23/10]

Stossel's Attack On Minimum Wage Latest In History Of Controversial Stances

Stossel: Medicare Is "A Ponzi Scheme." During the May 7, 2009, edition of Fox News' The O'Reilly Factor, Stossel had the following exchange with host Bill O'Reilly:

STOSSEL: Medicare is more than $30 trillion in the red; it's just unsustainable. If elderly people say yeah, I'm entitled to free Viagra, America's going broke.

BILL O'REILLY (host): So you're gonna be the mean guy and say that the older people in America not gonna get the stuff that they're used to getting? Is that what you're going to do, Stossel?

STOSSEL: I say it to some elderly people and they say we paid into the system. It was deducted from my paycheck. And it was, but what they don't know is that the average person now gets out 2 to 3 times what he pays in. And the government lied to us. It's a Ponzi scheme.

O'REILLY: It is. [Fox News, The O'Reilly Factor, 5/7/09]

Stossel: "It's Time Now To Repeal" Public Accommodation Section Of The Civil Rights Act. During the May 20 edition of Fox News' America Live, Stossel had the following exchange with host Megyn Kelly:

KELLY: Rand Paul agreed that if it's run by the government, yes, intervention is fine. He took issue with the public accommodations, with private businesses being forced to pony up under the discrimination laws.

STOSSEL: And I would go further than he was willing to go, as he just issued the statement, and say it's time now to repeal that part of the law. [Fox News, America Live, 5/20/10]

Stossel: "If A Private Business Wants To" Discriminate "It Ought To Be Their Right." During the May 20 edition of America Live, Stossel said: "You can call it public accommodation, and it is, but it's a private business. And if a private business wants to say, 'We don't want any blond anchorwomen or mustached guys,' it ought to be their right." [Fox News, America Live, 5/20/10]

Stossel Denounces Americans With Disabilities Act. In a September 1, 2010, article, Stossel wrote:

You own a business, maybe a restaurant. You've got a lot to worry about. You have to make sure the food is safe and tastes good, that the place is clean and appealing, that workers are friendly and paid according to a hundred Labor Department and IRS rules.

On top of that, there are rules you might have no idea about. The bathroom sinks must be a specified height. So must the doorknobs and mirrors. You must have rails. And if these things aren't right -- say, if your mirror is just one inch too high -- you could be sued for thousands of dollars.

And be careful. If you fail to let a customer bring a large snake, which he calls his "service animal," into your restaurant, you could be in trouble.

All of this is because of the well-intentioned Americans With Disabilities Act, which President George H.W. Bush signed 20 years ago.


Extra-wide bathroom stalls that reduce the overall number of toilets are only some of the unaccounted-for costs of the ADA. And since ADA modification requirements are triggered by renovation, the law could actually discourage businesses from making needed renovations as a way of avoiding the expense. [, 9/1/10]

Stossel Dismisses Title IX As Legislation By "Bully Lawyers" Whose "Conceit And Error" Result In Their Believing That "Just As Many Girls Want To Play Sports As Boys." From the December 15, 2010, edition of America Live:

MEGYN KELLY (host): You need Uncle Sam to come in and say, hey, be fair to the little girls.

STOSSEL: No. No, the school's trying to attract customers. If the customers want this, and more girls do want to play sports, it will happen. But the conceit and the error of the Title IX lawyers is that the demand is equal -- that just as many girls want to play sports as boys. And I don't think that's true. [Fox News, America Live, 12/16/10]

Posted In
Economy, Jobs, Wages, & Unemployment
Fox News Channel
John Stossel
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