The Myth of Minimum Wage Killing Jobs

[WonderGrunion]

The only argument conservatives ever use against raising the minimum wage is that it will kill jobs and job growth. They rely completely on this scare tactic to terrify low-information voters into voting against their own self-interests. I recently did some research to see what happened to unemployment after each increase in the minimum wage and this is what I found:



Contrary to the conservative narrative, unemployment actually decreases a majority of the time when the minimum wage is increased. The few times that unemployment increased after a raise in the minimum wage can only be used to claim there is no correlation between minimum wage increases and job growth. The idea that there is statistical proof that raising the minimum wage kills jobs is laughable at best.

Monthly unemployment statistics were not available until 1948 but yearly unemployment when the minimum wage was established was 19.1% and I think we all know what direction it went after that.

[WonderGrunion]

1. Labor Day weekend kick

[xchrom]

2. du rec.

[WonderGrunion]

17. Thank you for the K&R

Restoring labor is the first step to restoring our economy.

[Squinch]

3. Great chart! No arguing with that. Thanks.

[WonderGrunion]

21. I wanted to make it easy to digest

Thank you for the compliment.

[arely staircase]

4. Everytime the debte comes up they say it will kill jobs and cause inflation

it never does.

[Mnpaul]

5. What that chart really shows

Electing Republicans kills jobs and job growth.

[Triana]

6. Around 1970-1980s, job growth slowed/stalled

Not because of min. wage increase but due to fewer jobs and more workers in the market (more automation, women in workforce, more immigrants, more outsourcing & insourcing) -- anyway, it had nothing to do with the increase in minimum wage.

[PotatoChip]

7. Bookmarked. Thank you for this WG. (nt)

[WonderGrunion]

24. You are very welcome

Thank you for bookmarking it. Feel free to copy the picture and post it on Facebook.

[handmade34]

8. oh... too bad

the conservatives don't understand or rely on (those nuisance) facts

[WonderGrunion]

20. Facts do have a well known liberal bias.

[SunSeeker]

9. Great post. Let's see how long the Cato/Heritage folks take to attack it.

[Egalitarian Thug]

26. About 7 minutes. Then, the next one 16 minutes afterward.

[Ohio Joe]

10. K&R

Excellent post... Well done

[bobclark86]

11. This chart is worthless

because minimum wage is only a small part of the U.S. economy. Many, many other factors cause unemployment.
You know, like banks fucking people over and all the companies freaking out.

Oh, and try telling the 5-year McDonalds employee who was making the new minimum wage because of raises since they were hired that raising the minimum wage will be a good thing for them. They will NOT get a raise, meaning they will make the same as the brand-new employee. Lots of people here like to complain about "fair," so how "fair" is that to the long-term (and probably full-time with a family to support) worker?

Where's your chart on inflation, BTW (you know, something that has skyrocketed since the 1980s)? Those last jumps on the MW scale are a hell of a lot bigger (and more frequent) than the earlier ones. The first $2 raise took 36 years, the second $2 took 15, the next $3 took 15, with $2 coming in about a decade) How about the cost of a Big Mac meal at McDonald's? You know, things that actually COULD correlate to minimum wage?

Oh, wait. You didn't provide them. Wonder why?

(/Devil's advocate ... just making you think about the other factors involved )

[WonderGrunion]

14. But the Repukes never talk about inflation or banks fucking people

They just say that we can't increase the minimum wage because it kills job. My chart proves that it doesn't, or at the very least, it's not a causal factor.

[Gormy Cuss]

22. Gee, maybe their employers will recognize this and give those 5-year employees raises too.

That's what happened at every job I had back when I was working for minimum wage. Hourly workers who were already at the wage level of the new minimum were bumped up in pay. Granted, it wasn't always bumped up by the same amount but it was usually enough to make them feel recognized.

Anyone who brings inflation into the argument is ignoring the point of the chart. It's not a systematic, labor economics assessment of the economy. That's the topic for another thread.


(/angel's advocate here. Just responding to your )

[rhett o rick]

27. The chart is far from useless. It may not show the complete picture but at least he

provided some statistics. If you disagree with his conclusion then provide a counter argument and not just criticize his argument.

There are lots of factors involved but it would be a great conicidence if they all covered up the statistic of jobs loss do to an increase in min wage.

Devil's advocate? or good excuse to support the conservative meme.

[D Gary Grady]

28. Not worthless. Not even a chart.

It's a table, and it's useful not in showing a full picture (which is indeed complex) but in discrediting the naive notion that raising the minimum wage lowers employment in some simplistic way. Research shows that a higher minimum wage stimulates the economy and this tends to offset an employment decrease. (It helps that labor demand is relatively inelastic.) Whether inflation results depends to a large degree where production stands in relation to productive capacity.

I assume your saying that inflation "has skyrocketed since the 1980s" is a typo or something. It was sky-high for several years around 1980 but has since been quite low. Re fast-food prices, circa 1975 a Burger King Whopper with cheese cost a dollar (leading me to jokingly propose Whopper Index at the time) and today it runs about $3.50. If it had risen with overall inflation, it would today cost around $4.34 (based on CPI-U).

[niyad]

12. k and r

[OnlinePoker]

13. I looked at my working life from '79 onwards and this chart goes against your theory

In those 34 years, minimum wage was increased 10 times. 7 out of 10 times, unemployment was higher a year after the increase. You can't compare post WWII employment with modern employment because the dynamic has changed. Manufacturing is not being done here as much and as another poster pointed out, automation is taking on a lot of those jobs. So many of our jobs are menial now (fast food, service industries, etc) and the business owners know there is a ready labor pool that will take just about any wage in order to have some work. I honestly don't know how it can be fixed. Raising the minimum wage may help, but people earning just over minimum now may end up only earning minimum after the raise.

[WonderGrunion]

16. Those 7 out of 10 times were during Reagan and the Bushes

Under Clinton, minimum wage increases were followed by drops in unemployment.

Go figure.

[DirkGently]

15. Excellent post. n/t

[KG]

18. every time a min wage increase is proposed, the same dire predictions are cast.

[Populist_Prole]

32. And yet every time they never happen the same BS is still trotted out the next time

As if we had such short memories. Either that or they're depending on an ever increasing new supply of low-info types that never paid attention to the issue hitherto.

[reformist2]

19. Minimum wage increases are needed, but growing work/worker imbalance is the greater problem.

Whether it's offshoring, technology, changing consumer habits, whatever, it's becoming clear that there are fewer jobs available, relative to the number of people who need money, no matter what the minimum wage.

[lamp_shade]

23. Bookmarked...

[Bunnahabhain]

25. The chart leaves out a very important data point

Was the minimum wage in question an effective one or not? If the old one was below equilibrium for low skilled/low productivity workers raising it would have a far different predictable impact than if the old minimum wage was already materially above equilibrium and the raise moved it even farther from equilibrium. Also, do not forget the macro economic environment will constantly influence what equilibrium is. For instance, in 2005, my organization could not get the lowest skilled positions filled at minimum wage (had to pay $1-1.50 over). In 2008 we would see dozens of applications at minimum wage for those same positions.

An interesting anecdote in this whole debate occurred in 1996/97. If you remember Card and Krueger studied the impact of New Jersey raising minimum wage by 19% in 1992. Then along came the federal raise in 96 and PA saw this raise minimum wage by $.90 while NJ only incurred a $.10 raise due to its higher state minimum. I will leave it for anyone interested enough to go read the results themselves.

[WonderGrunion]

29. It leaves out several important data points

Particularly with split minimum wages early on and state minimum wages in the modern era. It is merely presented to shoot down the argument that increasing the minimum wage is a job killer. It is not intended to show all causes of unemployment.

[Bunnahabhain]

40. You're not seeing the importance of effective or not

If all instances here are an ineffective minimum wage the chart is 100% useless. Also, as to the impact with "split minimum wages" I'm going to guess you did not read the study I pointed you to.

[Kingofalldems]

30. Kick and Rec for DU supply siders.

[Igel]

31. I never know what to say to this kind of "here are data!" posts.

So here's a melange.

Often the unemployment rate increases in the year after a minimum wage increase. That's an observation. I can't draw a conclusion. Why? Because we usually raise minimum wages when we think that "we" can afford them, not in the depths of a recession. However, we usually feel we can afford it near the peak or just after the peak in a business cycle ... meaning that we should expect unemployment to be on the increase a year late.

Yeah--there's a causal connection. But it's between the peak of the cycle and raising unemployment on the one hand and the peak of the business cycle and increasing unemployment a year or more past peak. Showing that unemployment increases because of the minimum wage increase is difficult. (And it's the same problem with showing that minimum wage increases *improve* the economy. We have models. Tying it to clear evidence ... a bit harder.)

But the overall unemployment rate isn't the issue, now is it? We're talking about an unemployment differential for the lowest quartile of workers and its there that we'd see the largest affect. On the other hand, when there's a recession or recovery it's the lowest quartile of earners who have the largest jump or decline in unemployment for a lot of reasons.

It's not a leap to say that higher wages lead to higher unemployment. After all, for more profits business wants higher productivity--and for that you want to know not how many people are working but what the dollar amount of their output is compared to how expensive they are. I don't trust the claims. They're rather removed from data and have a lot of assumptions, basic and/or simplifying, built in.

It's also not a leap to say that higher wages lead to higher employment. We have nice models--we can argue if they're accurate or not--that talk about multipliers and government multipliers versus low-wage-earner multipliers. I don't trust the claims. For all the same reasons. For example, let's say Cathy makes $10k/year. Increase her income to $10500/year and she'll spend every last cent. But what she spends it on it going to be food, used clothing, and perhaps cheap imported goods. Pretty much none of that helps the US economy very much. However, the multiplier used for that $500/year increase is based on how middle-class earners would spend that $500--which would be for jobs that may help employ service workers or possibly for new big-ticket items.

GIGO.

[WonderGrunion]

33. In over half the data points, unemployment didn't increase 1 year later

The simple fact is the right wing puts out the talking point that raising minimum wage will kill jobs. This chart does only one thing and show that their is no empirical evidence to back up that claim.

[indepat]

34. If you are looking for an example of how destructive to the economy and

society a living minimum wage is, look no further than Australia to see its chilling effects. Then let's all say in unison the U.S. is the best place in the world to live, but don't try telling that to any of the 40% of Americans who are now effectively paid less than the 1968 minimum wage. A national travesty brought to you by your friendly corporatist government whose policies exacerbate and grow corporate welfare.

[WonderGrunion]

35. Yay! 50 Recs.

Thank you so much DU.

[jmowreader]

36. There's another one they use

They also believe the price of everything will go up.

I heard this hundreds of times at the fair two weeks ago, and it's bs. Idaho has the lowest minimum wage - the law says there is no mw here, so if the feds repeal their mw Iddaho doesn't have one. Washington has the highest...but on the things I buy from locally owned stores, it'sx cheaper over there.

[B Calm]

37. Republicans hate working people. Republicans = cheap labor

[WonderGrunion]

38. It's not just that they hate working people

They need them poor and ignorant so they don't realize what Repukes are doing to them.

[BadgerKid]

39. Good work -- can you overlay the federal elections?

Maybe show a multiline plot of min. wage, unemployment rate, recession, Democratic or Republican president, etc.

[Bunnahabhain]

41. Those are some of my favorite overlays

Because, you know, complex economic interactions are easily made granular into discrete units such as a presidential term.

[JoeTaxpayer]

42. Can there ever be an objective view?

I have no hidden agenda. I've seen the same talking heads offer their 'job killer' rhetoric, and cite the data that suggests a 300K job loss. Ok, let's say for a moment this is correct.

The current proposal is to go to 10.10 over the next 2 years. I think that you'll find the incremental money these workers get is spent before they get their next paycheck. This has a stimulative effect on the economy, and typically affects the very businesses they work for, especially the Walmarts.

I'm hopeful that the data is clear, that as we see the wage rise, we can measure this multiplier effect and also monitor the direct causation of job loss due to the rise. If we get 16M people to $10.10, at a cost of 300K jobs (a recent study offered this), we have those 16M earning an incremental $91B, based on the increase and 2000 hrs/yr, but $4B in lost wages from the 300K job loss. If the estimates are true, this seems acceptable as a trade off.

The $91B is high velocity money. For the non-economist, this means it's money that gets spent fast as these earners aren't putting it into the bank, they are spending it as soon as they make it. I've used the expression, "they are cashing their check at 5:30 on Friday to put dinner on the table at 7:00." It's unfortunate, but it also means an immediate boost to the economy, far more than the silly payroll tax cut years ago. A great number of the 16 million workers will require less government help, and the savings will more than offset those who have lost their jobs. The same talking heads that say "you wouldn't be in favor of the raise if you are one of the 300K" are offering a red herring, as if they actually care about those who will be helped or hurt.

The minimum wage hasn't risen in a long time, yet my grocery store has implemented self-checkout, as has my local Borg (Home Depot, if you are not a fan of pet names).

As a new poster here, I will candidly admit, I am not in favor of income redistribution. So please stop taking my tax money and subsidizing Walmart employees' wages. It would seem to me that if they paid their workers a fair wage, I can keep my money, as the workers wouldn't need the subsidy. In the spirit of "follow the money," my taxes aren't going to those minimum wage earners, but to the Walton family.

Last, the nonsensical argument of "if $10 is good why not raise the wage to $20, $25, etc?" My sane response? There is a number, reminiscent of the Laffer curve, where the next .10 in wages is a negative to the system. It may be at $12.50, it may be higher. I don't know. What I do know is that it's not at $7.25. The pundits that keep turning up on CNN never get this far in the conversation. I look forward to some intelligent discussion here.

[uppityperson]

43. What of your money is being used to subsidize Walmart employee's wages?

Would you please clarify what you mean? thank you and welcome to du

[JoeTaxpayer]

44. Walmart Subsidy

Minimum wage workers who are also on a welfare program, whether it's food stamps, sec 8, etc. The low wage creates a need for the subsidy, and of course, not every worker, but for the fact that Walmart is a notorious min wage employer, we are, in effect, paying taxes to line the Walton Family's pockets. The higher minimum wage will reduce the need for these workers to be on the public dole. I hope that's clear.

[uppityperson]

45. Thank you for clarifying, understood and I agree with that. Now, what about the military budget?