NY Post Latest To Attack Minimum Wage


In a January 16 editorial reacting to New York Mayor Michael Bloomberg's recent endorsement of a proposal to increase the state's minimum wage, the New York Post claimed that such a wage increase would "kill jobs," as it would amount to a "massive tax hike."

In fact, nonpartisan analyses have shown that increases in the minimum wage do not affect the employment rate.

A 2010 study on "Minimum Wage Effects Across State Borders" by University of California-Berkeley's Institute for Research on Labor and Employment (IRLE) found "no detectable employment losses from the kind of minimum wage increases we have seen in the United States":

For cross-state contiguous counties, we find strong earnings effects and no employment effects of 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 elasticities in the traditional specification are generated primarily by regional and local differences in employment trends that are unrelated to minimum wage polices. 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 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 affect 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.

And according to a 2009 IRLE 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.

The Post is not the first News Corp. outlet to level an attack on the minimum wage. In September 2011, Fox & Friends hosted author and businessman Peter Schiff to claim that the minimum wage negatively affects employment among the young and poor. And in December 2011, Fox's Stuart Varney appeared on Fox & Friends to rail against San Francisco's minimum wage hike.

Posted In
Economy, Jobs, Wages, & Unemployment
New York Post
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