Monday, June 26, 2017

Minimum Wage Increases Hurt Low-Wage Employment

Here is a link to an NBER  paper "Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence From Seattle".

Here is the Abstract.

This paper evaluates the wage, employment, and hours effects of the first and second phase-in of the Seattle Minimum Wage Ordinance, which raised the minimum wage from $9.47 to $11 per hour
in 2015 and to $13 per hour in 2016. Using a variety of methods to analyze employment in all
sectors paying below a specified real hourly rate, we conclude that the second wage increase to
$13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs
increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the
minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month
in 2016. Evidence attributes more modest effects to the first wage increase. We estimate an
effect of zero when analyzing employment in the restaurant industry at all wage levels,
comparable to many prior studies.

The paper's results are consistent with several conclusions.
  • The demand curve for low-wage labor is downward sloping, just as you would expect.
  • If the price of a good, A, is raised relative to a substitute, B, less of good A is bought and more of good B is bought, just as you would expect.
  • Minimum wage laws hurt those they are intended to help and help others.

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