Raise the Minimum Wage Now

Back from a brief vacation, in which I spent little to no time following the news, I see nothing much has changed.  One good thing that did happen is that the debt ceiling appears to have been suspended until March 2015.  That will at least make it a non-issue for the months leading up to the midterm elections. 


One item that will be an issue in the midterms is the minimum wage.   The positions on this are pretty much what you'd expect - Democrats support it and Republicans oppose it.  Muddying the waters right now is a CBO report that says raising the minimum wage to $10.10 would lift 900,000 workers out of poverty but potentially cause a loss of 500,000 jobs - though they admit the job loss could be very slight or up to a million.  Sounds like a compromise guess to me.  One guy says "Hey, we could lose a million jobs!".  Another says, "Not so, historically we've lost almost none whenever we've done this before."  "Okay let's say it's somewhere in the middle - 500,000."  "Agreed." 


Prone as CBO statements are to misinterpretation or outright abuse, this one will go far to aid the Republicans.  But what has been the historical impact on job growth and what do today's leading economists say?


Historically, there has been little impact of changes in minimum wage on employment rate.  A landmark 2010 study at the University of California- Berkeley examined the effects of the numerous state changes to minimum wage during the 1990's and 2000's.   By comparing counties that did raise the minimum wage with cross-state counties that did not, they found little to no impact on employment.


In fact, the effect of minimum wage changes on employment is one of the most studied in all of economics.  In 2013, the Center for Economic and Policy Research reviewed these studies and concluded: "The weight of that evidence points to little or no employment response to modest increases in the minimum wage."  CEPR then went on to examine "why the measured employment effects are so consistently small. The strongest evidence suggests that the most important channels of adjustment are: reductions in labor turnover; improvements in organizational efficiency; reductions in wages of higher earners ("wage compression"); and small price increases. Given the relatively small cost to employers of modest increases in the minimum wage, these adjustment mechanisms appear to be more than sufficient to avoid employment losses, even for employers with a large share of low-wage workers."


So when discussing this with your Fox News watching friends and relatives, here are a few more nuggets to toss their way from a fact check on MediaMatters.org that destroy the myth of job loss, the damage to small businesses or the preponderance of teenagers in minimum wage jobs:

• Numerous Studies Suggest Minimum Wage Increases Don't Kill Jobs, And May Even Increase Hiring
• Research Suggests Minimum Wage Increases Do Not Hurt Teen Employment
• Data Show States With Increased Minimum Wage Had Higher Small Business Job Growth. 
• "Indicators Of Economic Performance Were Consistently Better" In Higher Minimum Wage States For Small Business Job Growth
• Minimum Wage Growth Has Lagged Inflation, Leaving Minimum Wage Earners With Far Less Purchasing Power Today Than Previous Decades
• Half Of Minimum Wage Earners Are 25 Or Older, Representing Millions Of Adult Workers
• Less Than A Quarter Of Minimum Wage Earners Are Younger Than 20

The Raise the Minimum Wage. com website covers much of the same ground but also summarizes data from several other sources:

• leading economists agreed by a nearly 4 to 1 margin that the benefits of raising and indexing the minimum wage outweigh the costs.
• the most precise economic studies show no impact of minimum wage on job loss
• studies showing job loss from minimum wage increases invariably use imprecise or faulty methodology 

On the Misuse of CBO statements

A recent egregious example of the misuse of CBO statements occurred a week or so ago when Republicans started screaming "job loss from Obamacare."  What the CBO statement really said was that some may choose to work less hours or perhaps retire if they were given a chance to have affordable health care.  It's a demand side adjustment, you morons!  Not having to work two jobs to have health care is a good thing.  Not worrying about health care in retirement (whether forced or unforced) is a good thing.  These jobs will not go away - others will fill them and reduce the level of unemployment in the country.