Casey Mulligan: Wrong Again on Minimum Wage
By Anne L. Thompson
July 13, 2011
In yet another attack on the minimum wage, NYT Economix blogger Casey Mulligan argues that the failure of part-time employment to continue to increase at the end of 2009 is proof that the July 2009 minimum wage increase prevented more part-time jobs from being created.
But Mulligan’s reasoning is marred by two critical flaws that invalidate his argument. First of all, he attempts to use the employment of all part-time workers to evaluate the impact of the minimum wage increase, but only 11 percent of part-time workers made minimum wage in 2009. The vast majority of part-time workers are not minimum wage earners, so a crude look at changes in the overall employment of part-time workers before and after the minimum wage increase is nowhere near an accurate indicator of how changes in the minimum wage impact employment.
This alone is enough to nullify Mulligan’s conclusion that the 2009 minimum wage increase cost 800,000 part-time jobs, but let’s look at the second piece of his argument to see where else he goes wrong. Observing that the increase in overall employment among part-time workers halted and began to decline in the second half of 2009, Mulligan argues that the July 2009 minimum wage increase prevented employers from hiring more part-time workers.
However, attributing the flattening out of part time jobs to the minimum wage increase completely ignores the fact that part time jobs were increasing from December 2007 to June 2009 because companies were cutting back on workers’ hours and millions of people previously holding full time jobs (34 hours or more a week) were facing hours cutbacks that turned their fulltime jobs into part time jobs. Average weekly hours declined from 34.6 in December 2007 to a low point of 33.7 hours in June 2009. While minimum wage rose in July 2009 to $7.25, it is also the first month that average weekly hours begin to increase again. The increase in part-time employment begins to level off as fewer workers see their hours cut and more workers have their hours restored.
If you break down part-time employment into voluntary part-time employment (workers seeking part-time positions) and involuntary part-time employment (workers seeking working part-time because they are unable to find full-time positions), you will see that the increase in part-time employment from 2007-2009 was driven by involuntary unemployment— companies were slashing jobs and hours as the economy convulsed, and many more people were becoming involuntarily employed part-time as hours were cut.
Thus, the leveling off of the increase in part-time jobs at the end of 2009 is not a result of the minimum wage increase, but it is instead a result of the macroeconomic trend that employers were no longer dramatically cutting the hours of full-time jobs to create more part-time positions, but instead were beginning to expand hours. July 2009 was the first month the country was officially out of recession, and businesses responded by beginning to restore the hours of the workers they had.