The Job Loss Myth

The Most Rigorous Research Shows No Job Loss from Minimum Wage Increases:

Why Does the Minimum Wage Have No Discernible Effect on Employment? (2013) reviews the past two decades of research on the impact of minimum wage increases on employment: this study concludes that the weight of the evidence points to little or no effect of minimum wage increases on job growth. The study also finds that a review of the minimum wage literature commonly cited by minimum wage opponents is flawed because it is subjective, relies in large part on studies of wage increases in foreign countries, and fails to consider the most sophisticated and recent minimum wage studies.

Minimum Wage Effects Across State Borders (2010) provides the most sophisticated study to date of the effects of increases in the minimum wage on job growth in the United States.  Taking advantage of the fact that a record number of states raised their minimum wages during the 1990s and 2000s – creating scores of differing minimum wage rates across the country – the study compares employment levels among every pair of neighboring U.S. counties that had differing minimum wage levels at any time between 1990 and 2006 and finds that higher minimum wages did not reduce employment. [NELP summary]

Do Minimum Wages Really Reduce Teen Employment? (2011) examines every minimum wage increase in the United States over the past two decades—including increases that took place during protracted periods of high unemployment—and finds that raising the wage floor boosted incomes without reducing employment or slowing job creation.  The research demonstrates how a body of previous research—one frequently relied on by business lobbyists who oppose minimum wage increases—inaccurately attributes declines in employment to increases in the minimum wage by failing to sufficiently account for critical economic factors. [NELP Summary]

Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply (2000) is a follow-up study by David Card and Alan Krueger that repeats their 1994 analysis, but uses official government data to determine employment figures. The study finds that the minimum wage increase in New Jersey did not affect employment in fast-food restaurants after New Jersey’s 1991 increase or after the 1996-1997 federal increases eliminated the differences in minimum wages between the two states.

Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania (1994) is a landmark study published by David Card and Alan Krueger in the American Economic Review examining employment at fast-food restaurants on both sides of the New Jersey-Pennsylvania border after New Jersey raised its minimum wage to $5.05 an hour while Pennsylvania’s minimum wage held constant. The authors conducted a phone survey of over 400 fast-food restaurants and found no evidence that the increase in the minimum wage in New Jersey led to job loss—in fact they found employment increased in fast-food restaurants in New Jersey. For this and related research, Card was awarded the John Bates Clark medal in 1995—the so-called “junior Nobel prize,” granted by the American Economics Association every two years to the best economist under forty.

Business Voices Embrace New Research Showing No Job Loss from Minimum Wage Increases:

• The Economist, November 2012: "Evidence is mounting that moderate minimum wages can do more good than harm...Britain’s small, regular changes [in the minimum wage] may be easier for firms to absorb than America’s infrequent but hefty minimum-wage increases.” (Source)

• Bloomberg News, April 2012: "[A] wave of new economic research is disproving those arguments about job losses and youth employment. Previous studies tended not to control for regional economic trends that were already affecting employment levels, such as a manufacturing-dependent state that was shedding jobs. The new research looks at micro-level employment patterns for a more accurate employment picture. The studies find minimum-wage increases even provide an economic boost, albeit a small one, as strapped workers immediately spend their raises. Let us hope that states lead the way on the minimum wage, and that they tie increases to the cost of living, making endless rounds of legislation unnecessary. Then let us hope that fresh research and improved lives built on hard work compel Congress to follow.” (Source)
Evidence is mounting that moderate minimum wages can do more good than harm” and “Britain’s small, regular changes [in the minimum wage] may be easier for firms to absorb than America’s infrequent but hefty minimum-wage increases.”

• Crain's New York Business, February 2012: "“Critics of [the minimum wage] proposal are making the same arguments as the last time the Legislature increased the minimum wage, in 2004. The hike to $7.15 an hour from the federal minimum of $5.15 was phased in over three years. If the change had a cataclysmic effect on businesses that depend heavily on minimum-wage workers, we certainly missed it. Raising New York's minimum would not put it at a competitive disadvantage with New Jersey, where the wage floor is also $7.25. Businesses employing many minimum-wage workers tend to be in the service sector and must set up shop near their customers. Indexing the minimum wage to inflation is logical and would erase the pressure on lawmakers to keep returning to the issue. Objections . . .  while meriting consideration, are essentially objections to the very existence of a minimum wage, which has been a fixture in the U.S. since 1938 and has never stopped our economy from flourishing.” (Source) 

• A record number of individual businesses and trade associations have endorsed raising and indexing the minimum wage. Nearly 1,000 business leaders, including Costco, U.S. Women’s Chamber of Commerce CEO Margot Dorfman, Addus Health Care CEO Mark Heaney, Credo Mobile President Michael Kieschnick, ABC Home CEO Paulette Cole, and small business owners from all 50 states, signed a statement supporting the last increase in the federal minimum wage.

• Hundreds of Economists Say: Raise the Minimum Wage (2006) is an open letter from more than 650 economists, including 5 Nobel prize winners and 6 past presidents of the American Economic Association, stating that increasing federal and state minimum wages, with annual cost-of-living adjustments for inflation, "can significantly improve the lives of low-income workers and their families, without the adverse effects that critics have claimed."

The Bottom Line on Minimum Wage and Job Growth:

Two decades of rigorous economic research have found that raising the minimum wage does not result in job loss. While the simplistic theoretical model of supply and demand suggests that raising wages reduces jobs, the way the labor market functions in the real world is more complex. Reseachers and businesses alike agree today that the weight of the evidence shows no reduction in employment resulting from minimum wage increases.