More Evidence on the Negative Effects of the Minimum Wage
University of California–San Diego economist Jeffrey Clemens’s recently published analysis once again indicates that raising the minimum wage has detrimental effects on low-skilled workers. Clemens’s analysis investigated the effect of the increases in the Federal minimum wage from $5.15 to $7.25 between 2007 and 2009 on the most vulnerable group of workers: those aged 16 to 30 without a high school education.
Because the minimum wage increase was not equally binding in all states, Clemens was able to analyze the differential effect of the hike across groups of workers and states. After controlling for the overall negative economic effects stemming from the Great Recession, Clemens reports as follows:
My baseline estimate is that this period's full set of minimum wage increases reduced employment among individuals ages 16 to 30 with less than a high school education by 5.6 percentage points. This estimate accounts for 43 percent of the sustained, 13 percentage point decline in this skill group's employment rate. . . .
As argued before in numerous analyses published by the Show-Me Institute and others, raising the minimum wage simply does not improve the economic welfare of all low-wage workers. Clemens’ work reaffirms the notion that those whom minimum wage increases are touted as benefiting the most are in fact those who are the most likely to be harmed.
There are better ways to improve the welfare of the most vulnerable workers in society. Improving and expanding programs like the earned income tax credit (EITC) should be considered before more minimum wage increases do further harm to the neediest in society.