Minimum Wage
5:46 am
Wed March 5, 2014

Economists' Views Differ on Whether Minimum Wage Would Hurt Job Growth

Reverend Samuel Saylor of Hartford spoke at a rally outside the Connecticut State Capitol last May to support raising the minimum wage.
Credit Connecticut Senate Democrats / Creative Commons

President Barack Obama will be in Connecticut on Wednesday with four governors to push for a higher minimum wage of $10.10 an hour.

The increase is controversial, but what might actually happen if it goes up? Increasing the minimum wage is a contested political issue, but it's also an economic question that can be studied.

It is a tradeoff between the policy of raising the wages for some people, but also making it harder for other people to get their foot on that job ladder."
Jonathan Meer

Jonathan Meer, an assistant professor of economics at Texas A&M University, recently co-authored a working paper available from the National Bureau of Economic Research explaining what would happen if the minimum wage goes up. He looked at three government data sets that cover 37 years, and he said an increase would raise wages for low-wage workers, but it would also create fewer jobs at that level.

"It's not a free lunch," Meer said. "It is a tradeoff between the policy of raising the wages for some people, but also making it harder for other people to get their foot on that job ladder and start getting work experience."

‪Not all economists agree.

‪Arindrajit Dube, a visiting professor at the Massachusetts Institute of Technology, also reviewed the past major studies on minimum wage research and wrote a paper refuting Meer's conclusion.

Dube wrote that Meer did not prove a minimum wage increase created fewer new jobs, because the relationship they found shows up in sectors like manufacturing, which don't have a lot of minimum wage workers. At the same time, Meer's conclusion didn't hold for low-wage sectors like food services and retail. Meer and his co-author responded in an appendix.

‪Dube said based on a review of his work and other major studies, raising the minimum wage would have a fairly small impact on overall jobs. He said, "It would lead to several million less people being under the poverty level, based on the best existing evidence." He added that it would also reduce the turnover rate in low-wage jobs, and boost prices.

‪Earlier this year, more than 600 economists, including Dube, signed a letter to the President in support of raising the minimum wage, saying an increase could stimulate the economy.

More than 70 percent of Connecticut residents support raising the minimum wage, according to a poll released by Quinnipiac University on Tuesday.