WH Economic Report Cherry Picks Research to Support Minimum Wage Hike

This week, the White House released its annual economic report by the president’s Council of Economic Advisors – and supported raising the federal minimum wage as one of its solutions for boosting the economy.

To argue this, the White House report hand picks a few sympathetic studies to make the case for raising the minimum wage and argue it won’t have adverse effects on jobs for affected employees.

A survey of the broader span of minimum wage research, however, shows that these studies’ conclusions are in the distinct minority. Economists David Neumark and Peter Shirley conducted a review of three decades of the literature on the effects of raising minimum wages, and found a majority of studies indicate that hikes do cause employment loss. Commenting on the timeline, they state: “There is no evidence of estimates becoming less negative in more recent studies.”

While the report mentions “the debate continues” regarding the employment effects of raising the minimum wage, it cites the infamous 1994 Card and Krueger study which was debunked for poor methodology. The study concluded a New Jersey minimum wage hike had increased employment compared to neighboring Pennsylvania which did not raise wages, and became a basis for policies supporting minimum wage hikes.

The study’s analysis was debunked after payroll data acquired by the Employment Policies Institute revealed Card and Krueger’s data had no relation to the real-time restaurant payroll records. Economists David Neumark and William Wascher found when analyzing real payroll data, Card and Krueger’s restaurant sample actually showed a decrease in employment due to New Jersey’s minimum wage hike.

Failing to mention the conclusions about the broad majority of evidence on minimum wages causing job loss, and holding up a refuted study that says otherwise, paints a very distorted picture of what could happen under a federal minimum wage increase.

In fact, the nonpartisan Congressional Budget Office found last year’s proposed $15 federal minimum wage could cost the nation anywhere from 1.4 to 2.7 million jobs.

The White House report, with minimal evidence to argue a federal wage hike would not cause millions of employees to be out of work, then shifts to argue doing so would reduce inequality. Unfortunately, the report also fails to mention the evidence that minimum wage hikes are ineffective at delivering wage benefits to poor families at best, and may even send households into poverty after job losses.

The White House has latched onto the $15 minimum wage – introducing the mandate for federal contractors via executive order when the Raise the Wage Act failed in Congress last year. But given its job loss tradeoffs for minimal effectiveness, other solutions such as expanding the earned income tax credit would do more to boost earnings and more people returning to the workforce.