President Joe Biden is pushing a federal $15 minimum wage in his sweeping $1.9 trillion COVID-19 relief package, and also the policy is only gaining steam in progressive circles. But newly released research undercuts the primary argument progressive economists make in support of minimum wage increases.
A Job-Killing Impact
A new paper published by the National Bureau of Economic Research surveys your body of economic research on minimum wage increases and rebuts the concept empirical data show no impact of increases in minimum wage hikes. The authors find that of all the available research on the subject they reviewed, there is a \”clear preponderance\” of findings that demonstrate a job-killing impact. The documentation of job losses is much more pronounced for teenagers, young adults, and also the less-educated.
\”[The] body of evidence and its conclusions point strongly toward negative effects of minimum wages on employment of less-skilled workers, especially for the types of studies that would be likely to reveal these negative employment effects most clearly,\” economists David Neumark and Peter Shirley write.
Minimum wage proponents bury their heads within the sand in order to argue that you can just pass a law to miraculously make everyone richer with no consequences. You can't.
This research is a direct rebuttal of one of the most popular pro-minimum-wage-hike arguments offered by progressive economists. They rarely engage directly using the ironclad theory of supply and demand in competitive labor markets that proves the minimum wage causes unemployment as with every other price floor creates surplus.
Empiricism and also the Handwave
Many advocates simply pivot to empiricism and handwave about \”the data\” not showing any impact.
\”There's just no evidence that raising the minimum wage costs jobs, at least when the starting point is as low as it is in modern America,\” economist turned left-wing New York Times columnist Paul Krugman has argued. . Similarly, economist and former Fed Chair Janet Yellen recently reversed her prior position throughout a confirmation hearing for her political position as the Biden administration's Treasury Secretary. Now, she argues the research suggests a \”very minimal\” impact on employment from minimum wage increases.
The same argument has pervaded through much of academia.
\”The last decade has witnessed a wealth of rigorous academic research around the effect of minimum wage increases on employment, with the weight of evidence showing that previous, modest increases in the minimum wage had little if any negative effects on the employment of low wage workers,\” reads instructions signed by prominent pro-minimum-wage economists in 2021.
But this new research, after surveying the concept of empirical evidence, finds that reaching these progressive economists’ conclusions \”requires discarding or ignoring most of the evidence.\”
The Takeaway: There is no Escaping the Trade-Offs of the Minimum Wage
When the federal government mandates a price for labor – aka a minimum wage – that exceeds the market rate, employers will inevitably purchase less labor. It is simply like consumers would purchase less soda when the government arbitrarily mandated higher prices for it than what it's actually worth to individuals. In fact, that's the exact point of \”soda taxes\” passed in the name of public health; they reduce soda consumption. The same thing happens with labor.
The lucky workers who end up being able to keep their jobs may benefit from the artificially high wage, however, many others will not find work on all. As far as a federal $15 minimum wage is worried, the nonpartisan Congressional Budget Office estimated that it would eliminate 1.3 to 3.7 million jobs altogether.
This was before the COVID-19 pandemic. Layoffs would likely be much worse now, because of so many small businesses already on the brink of collapse amid lockdowns along with a struggling economy.
No amount of empirical squirming can get rid of the reality of trade-offs. Minimum wage proponents bury their heads within the sand in order to argue that you can just pass a law to miraculously make everyone richer with no consequences. You can't.
\”There are no solutions, there are just trade-offs,\” economist Thomas Sowell once observed, \”and you try to get the best trade-off you can get, that’s all you are able hope for.\”
\”Economics teaches you that making a choice means giving up something,\” economist Russ Roberts has similarly explained.
The job losses that include minimum wage hikes are a fundamental economic reality. This latest research offers another reminder that, no matter how much wish-casting progressives participate in, there's no escaping trade-offs in public policy.
Brad Polumbo is a libertarian-conservative journalist and Opinion Editor at the Foundation for Economic Education.