Categorized | General Interest

States and The Minimum Wage

As the debate heats up over raising the federal minimum wage (Nancy Pelosi says the hike will be passed in the first 100 hours of the new Democratic House majority), it’s worth looking at something the folks at the Economic Policy Institute put out which documents how state minimum wage hikes have fared. EPI asked:

Have these state actions had any effect? Are wages higher than they would have otherwise been, i.e., are these higher minimums reaching their intended beneficiaries? Is employment worse than it would have otherwise been? The evidence presented here suggests that the answers are, respectively, yes, yes, and no. Wages are higher and employment is no lower in these states than they would have been without these actions:

* For teenagers, a group in which a large percentage of those employed earn low wages, there is strong evidence that minimum wage increases raise wages without reducing employment or discouraging labor supply.

* For young adults and adults with no college education, groups with smaller percentages of low-wage workers, there is some evidence that minimum wage increases lead to higher wages without reducing either employment or labor supply.

* Because of the small numbers in the sample, any results for racial minorities may well be weak. That said, results for racial minorities are mixed. One analysis provides evidence that the minimum wage may increase both employment and labor force participation of young African Americans (16-24 years old). The other analysis provides evidence (which further examination reveals not to be robust) that higher minimum wages reduce employment and labor supply among young Hispanics (16-24 years old).

* In the restaurant industry, often thought to be unusually sensitive to the minimum wage, the evidence is clear that minimum wage increases positively effect wages; one analysis finds a small positive impact on employment.
o The evidence for any employment response exists in only a few cases, many fewer than for wages. In most of these,
o the employment response is positive rather than negative, contrary to the old textbook explanation of the minimum wage. These and other factors suggest that a more careful look is called for in these cases.

* This more careful look indicates that evidence for both the positive employment response in the restaurant indus-try and the negative response among young Hispanics is not statistically robust. Only two employment responses survive this examination, those among teenage boys and among adult men whose education ended with their high school graduation. Both of these responses are positive.

You can read the rest of the briefing here.

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