Raising minimum wage does not hurt emploment

Nation - Critics suggest that employers of low-income workers will replace them with machines if their labor becomes more costly. But in the real world, businesses are run by human beings who make a range of choices. Bosses often respond to higher labor costs not by cutting workers, but by requiring workers to be more efficient. They may reduce bonuses for higher-paid employees. They could pass the cost on to customers through higher prices, although a review of academic papers found that a 10 percent wage increase raised prices by no more than 0.4 percent. Most important, employers are likely to find that a higher wage reduces costly job turnover among trained workers. Higher wages also put more money into workers’ pockets—to the tune of some $30 billion—which would then be spent at these businesses.

 

Real-world evidence is reassuring. In 2010, three economists looked at 1,381 counties over sixteen years, finding that minimum-wage hikes had no effect on employment. Other economists looked at every state-level minimum-wage increase over twenty-five years at times when unemployment was already high and found no evidence of an effect on job creation. Yet another group looked at the effect of state-level increases on teenagers—canaries in the coal mine of low-skilled employment—and found zero impact on their jobs.
Even this year, the thirteen states that raised their minimum wages on January 1 have experienced higher employment growth than those that didn’t. Washington, the state that has boasted the highest minimum wage for fifteen years, had a job-growth rate 0.3 percentage points above the national rate. It’s impossible to draw a clear line of causation from a higher minimum wage to job growth, but the hikes clearly did not torpedo local economies. Across the board, there’s little reason to think that a higher wage would decimate job growth and good reason to think it could give the economy—and workers—a boost.