Whether in support of local, state, or federal minimum wage hikes, you can count on progressive “researchers” to produce data reports overwhelmingly in favor. The integrity of these reports is less appealing than their conclusions.
Sen. Bernie Sanders and Rep. Bobby Scott’s introduction of the Raise the Wage Act of 2023, which would raise the federal minimum wage to $17 per hour and eliminate the federal tip credit, was almost immediately followed by a report detailing the bill’s positive impact.
The left-leaning, union-funded Economic Policy Institute (EcPI)’s report claims the effects of the new legislation would only be positive, gaining wide coverage in the media.
If that seems too good to be true, that’s because it is.
The report on its face looks innocuous and informative – claiming to spell out “the impact” of Sanders and Scott’s new legislation. But the title should be changed to reveal its purposefully misleading conclusions: it only discusses impacts of employees who earn the minimum wage and get to keep their jobs, failing to discuss the real employment tradeoffs widely-acknowledged by American labor economists.
First, the EcPI report first asks “who would be affected” by the $17 minimum wage bill – and proceeds to only describe those who would receive hourly wage increases, ignoring disemployment effects. They fail to acknowledge that the overwhelming majority of economists over the last 30 years find minimum wage hikes cause some degree of job losses, and do not even venture to test this hypothesis under the parameters of the new bill.
- Conversely, the latest Employment Policies Institute study conducted by economists from Miami and Trinity Universities finds the Raise the Wage Act of 2023 would cost up to 1.7 million employees their jobs nationwide – effectively bringing their minimum wage to $0.
Second, the EcPI report relies on out-of-date employment data and a 2019 “wage simulation model” to come to their conclusions about the new bill. The methodology for this analysis is hosted on an entirely different webpage, and explains that the basis for this model relies on a sample of employees taken from 2013 to 2017. The analysis published for the 2023 bill does not indicate this data has been updated, except for the “underlying wage distribution” (the proportion of employees earning a range of hourly wages) is based on 2022 Current Population Survey data.
- In contrast, the Employment Policies Institute’s study uses the Congressional Budget Office’s own methodology and employment assumptions, based on updates released in February 2023. The sample of employees used is updated to include data from May 2021 through April 2023. In short, the economists estimate the job loss impacts of the $17 minimum wage proposal based on the most up-to-date data available and based on well-documented, government-utilized methods.
Third, EcPI inflates its impact estimates by including “directly” and “indirectly” affected employees, but fails to recognize that the upward ripple effect of drastic minimum wage hikes contributes to the negative tradeoffs such policies cause for businesses and their employees. The report estimates 14.7 million employees would be directly eligible for wage increases under Bernie’s $17 minimum wage, because their existing minimum wage at the state level is lower than this proposed hike. Yet to get to the widely-cited “28 million” statistic, they include an additional 13.1 million employees whose wages are within 115 percent of the proposed $17 minimum wage, who they estimate may get a raise beyond $17 per hour since the most entry-level employees will now be compensated at the higher rate.
This shockwave means that a $17 minimum wage will not only affect the labor costs for the most entry-level employees, upward pressure on wages will exist for employees up an employer’s pay scale. This means as the wage bill rises, entry-level employees may suffer job loss consequences the most as employers must make staffing cuts to adapt to the higher wage mandates. This is documented in economic research: Neumark and Shirley find across 30 years of minimum wage research, economists find job loss effects are strongest for younger, less-skilled employees.
- The Employment Policies Institute analysis finds this to be the case for the proposed $17 wage bill: nearly two-thirds of job losses due to a $17 minimum wage would be for employees aged 16 to 24.
Last time Sanders introduced a federal minimum wage hike bill in 2021, he asked the nonpartisan Congressional Budget Office (CBO) to analyze the impact on the federal budget. The CBO concluded what economists have been saying for decades: while some employees may experience hourly wage boosts, this comes at the cost of millions of other employees losing their jobs altogether.
This wasn’t up for debate two years ago – yet progressive activists fail to recognize this basic economic principle today.
Progressives peddling misconstrued data in support of minimum wage hikes is nothing new. Supportive lawmakers still widely reference an old Card & Krueger study that claims wage hikes do not negatively impact employment, despite the fact that the study has been debunked by other labor economists.
Since the foundation for such dramatic minimum wage increases is already shaky, progressives continue to pile on bad data to make their case. This most recent study is no exception, and lawmakers reviewing the impacts of the Raise the Wage Act should carefully consider the full consequences of the bill.