Does It Matter What a Lost Job Would Have Paid?

In a recent Wall Street Journal editorial, economist David Neumark challenges some of the myths about the minimum wage. From the article:

Economists have written scores of papers on the topic dating back 100 years, and the vast majority of these studies point to job losses for the least-skilled. They are based on fundamental economic reasoning—that when you raise the price of something, in this case labor, less of it will be demanded, or in this case hired.

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The broader research confirms this. An extensive survey of decades of minimum-wage research, published by William Wascher of the Federal Reserve Board and me in a 2008 book titled “Minimum Wages,” generally found a 1% or 2% reduction for teenage or very low-skill employment for each 10% minimum-wage increase.

That has long been the view of most economists, although there are some outliers.

Neumark himself conducted two policy studies on the effect of minimum wage laws right here in Missouri. These studies (from 2006 and 2012) examined the minimum wage increases being considered at the time. Both studies drew from a large body of existing research that suggests that minimum wage hikes do more harm than good.

Despite all of the research and hard evidence, some politicians and activists still push for minimum wage increases. In fact the “Fight for 15” movement, a campaign funded in large part by service industry unions, is still agitating for a 15 dollar minimum wage in Kansas City and St. Louis. 

Let’s not ignore what the evidence says: Unemployment is a clear downside to the minimum wage. And that downside is borne by the people minimum wages are usually thought to help.