Institute to publish comprehensive study on the effects of the minimum wage
In
his State of the Union address, President Obama called on Congress to
act on a proposal to increase the minimum wage to $10.10 per hour.
Raising wages, he said, is "Good for the economy; it's good for
America."
To contribute to the discussion the Upjohn Institute is providing—prior to publication this spring—the findings of an exhaustive new study of the wage, employment, and poverty impacts of the minimum wage. Supported by the Upjohn Institute, Dale Belman and Paul Wolfson, authors of the forthcoming book titled What Does the Minimum Wage Do? (Upjohn Press), performed a meta-analysis on scores of published studies examining the effects of the minimum wage. The studies were based on data mostly from the United States but also from other countries. The authors’ comprehensive analytical efforts allow them to conclude the following:
To contribute to the discussion the Upjohn Institute is providing—prior to publication this spring—the findings of an exhaustive new study of the wage, employment, and poverty impacts of the minimum wage. Supported by the Upjohn Institute, Dale Belman and Paul Wolfson, authors of the forthcoming book titled What Does the Minimum Wage Do? (Upjohn Press), performed a meta-analysis on scores of published studies examining the effects of the minimum wage. The studies were based on data mostly from the United States but also from other countries. The authors’ comprehensive analytical efforts allow them to conclude the following:
- Moderate increases in the minimum wage, characteristic of the United States over the last half of the twentieth century, have the effect that was intended by original supporters of the legislation; increasing the minimum wage substantially increases the earnings of those at the bottom of the income distribution and reduces wage inequality.
- Negative effects on employment resulting from increases in the minimum wage were too small to be statistically detectable in the meta-analsis. The authors conclude thatemployment effects are too modest to have meaningful consequences for public policy in the dynamically changing labor markets of the United States.
- Evidence of positive spillover effects on the wages of those earning slightly more than the new minimum wage is mixed, but generally supports their existence, particularly for women.
- The bottom line for Belman and Wolfson is that the minimum wage should be seen as one of a set of public policy tools aimed at improving the standard of living of the less well-off, and moderate increases in the minimum wage would likely aid low income individuals and families with acceptable costs to the nation.
Indeed, Daniel P. Kuehn...it does look like an interesting book.
ReplyDeleteI'm sure the Upjohn book will not conclude that by simply raising the minimum wage a state could improve it's overall economic conditions but I'm sure that's the conclusion that will be used by people who what to enact legislation that increases the minimum wage (whether at the state or national level). But isn't this conclusion at odds with the overall economic condition conclusions from the discussion paper by Allegretto, Dube, et. al., "Credible Research Designs for Minimum Wage Studies" (IZA DP No. 7638)? The conclusions from that paper include,
ReplyDelete"We begin by showing that states experiencing greater increases in minimum wages over the past two decades…have experienced more severe economic downturns; they have experienced greater job polarization in the form of sharper reduction in routine task intensive jobs; and they have seen faster growth in upper-half wage inequality."
and,
"The greater growth in upper-half inequality in high minimum wage states could thus reflect factors that also explain why the employment rates for low-skill groups such as teens have fallen in those same states."
and,
"In other words, high minimum wage states experienced greater growth in employment polarization, which likely put more downward pressure on employment for low-skill workers such as teens."
and,
"…the variance (over time) in the unemployment rate was 48 percent larger in high minimum wage states, and this difference was statistically significant at the 5 percent level. Consistent with this pattern, the actual employment decline from peak to trough was 39 percent greater in high minimum wage states, when averaged over all recessions in the 1990-2011 period."
and lastly,
"…we also find regional clustering in these variables…For example, the coastal states typically display a greater than average fall in routine task intensity, a greater than average increase in 90-50 wage inequality, and a greater variance in the unemployment rate. As shown in Figure 3, they are also more likely to be high minimum wage states."
I'm sure the Upjohn book's conclusions are based upon finding causation between economic conditions and increasing the minimum wage whereas IZA DP #7638 is simply showing correlation between the two (unless I'm reading it wrong). But even without knowing why overall economic conditions are worse for higher minimum wage states, unless I'm completely wrong about their paper's conclusions I would have to place more importance on the correlations found by Allegretto, Dube, et. al. and recommend not increasing the minimum wage.
Hi Daniel,
ReplyDeleteOff topic, but do you have any thoughts on this:
http://socialdemocracy21stcentury.blogspot.com/2014/02/the-recession-of-19201921-versus.html
regards
Do studies of real min wages being raised from lower than current rate to roughly the current rate tell us much about raising from the current rate to 20-40% higher than the current rate?
ReplyDelete