Recently, the Democratic National Committee released its party platform that included raising the federal minimum wage to $15 per hour. Around the same time, Princeton economist Alan Blinder claimed a federal wage hike to $15 wouldn’t cost jobs, because “research has shown this isn’t the case.”
EPI’s Michael Saltsman and University of California-Irvine economist David Neumark quickly jumped into the discussion to dispel this narrative.
In fact, the bulk of economic evidence shows clearly that minimum wage hikes result in job losses. Dr. Neumark’s own research surveys three decades of studies on the topic and reaches this conclusion, and finds these effects are worse for younger and entry-level employees.
So what IS the economists’ consensus on the employment effects of minimum wage hikes?
An EPI survey of 160 U.S. labor economists found 83% believe the federal minimum wage should be below $15 per hour – many citing negative impacts of wage hikes on teen and entry-level employment, small business survival, and inflationary pressures.
For tipped restaurant workers, the results of wage hikes with tip credit elimination can be even worse. Dr. Neumark finds every $1 tipped wage hike causes a 6% decline in tipped restaurant employment and a similar decline in earnings for tipped restaurant workers.
Analysis by the nonpartisan Congressional Budget Office (CBO) finds the most recent proposal to raise the minimum wage to $15 nationwide with tip credit elimination could cost nearly a million jobs and send over a hundred thousand workers into poverty.
Naysayers point to a single study by David Card and Alan Krueger to say that wage hikes don’t cost jobs. The study looked at neighboring Pennsylvania and New Jersey to claim the latter’s wage hikes had increased jobs compared to Pennsylvania, which didn’t change it’s minimum wage. Yet EPI reviewed Card and Krueger’s methodology and gained actual payroll data in both states – and found jobs had actually decreased in New Jersey as a result of the hikes.
Like all economic policies, minimum wage hikes come with serious tradeoffs. Don’t let a revival of a bad idea erase decades of economic research showing wage hikes cause job losses for many.