Study: Higher Minimum Wage Doesn't Increase Unemployment

A new study shows that increased minimum wage does not increase unemployment.

Over a 16-year period, the study looked at counties that were located across the border
from another county that had a minimum wage increase. Instead of increasing unemployment, the study found that higher wages decreased worker turnover. That’s good for both employers and employees.

Here’s a transcript of an interview with one of the study’s authors.

MINIMUM WAGE EFFECTS ACROSS STATE BORDERS: ESTIMATES USING CONTIGUOUS COUNTIES (PDF) via Economix

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  1. fpage77 says:

    Just increases the money profit hungry companies don’t get to add to their yearly profits their “shareholders” demand.

    • two_handed_economist says:

      In some areas, the local legal minimum wage is considerably lower than the going market wage for inexperienced, unskilled labor; there, raising the minimum wage is just political bluster with no economic effect.

      But let’s say the law has real bite. If wages to employees increase, it’s true that business owners could do nothing — and accept lower profits. That’s unlikely, though. A substantial increase in wages for all businesses in an area may instead allow businesses to increase prices to cover increased costs, with consumers worse off.

      But are there workers whose wages never rise above minimum, regardless of their experience, dedication, and capability? What low skilled jobs do they perform? I could easily argue that higher worker turnover is beneficial for hard workers who want to get out of crappy jobs, and good for employers who want only unskilled, inexperienced workers.

      • Nogard13 says:

        “But let’s say the law has real bite. If wages to employees increase, it’s true that business owners could do nothing — and accept lower profits. That’s unlikely, though. A substantial increase in wages for all businesses in an area may instead allow businesses to increase prices to cover increased costs, with consumers worse off.”

        Let’s say a typical business in the US has to raise it’s wages by $.50 an hour. According to the Census, the average business in the US has 16.1 employees (we’ll even round it up to 17), even if not all of them are full-time. But, even if they are, that’s an extra $340 a week in wages, plus 7.75% for FICA, for a total increase of $366.35 each week (that’s $19,050.20 a year), and this assumes that every single one of the employees receives minimum wage (some, like managers, receive more).

        The average business has sales of 387,214 a year, meaning that in order to cover their $19K increase they’d have to increase prices a whopping .047%. Yes, that’s less than 5 TENTHS of a percent.

        Do you really think it hurts the economy if prices rise by less than 5 tenths of a percent? I’d gladly pay that in order for minimum wage earners to make a little more each paycheck.

        BTW, all data was gathered from http://www.census.gov, I just had to search and do the calculations.

        • voogru says:

          You are forgetting that the suppliers of the business will have to do the same thing, meaning the products the businesses buy will increase in costs.

          A 5% increase in labor costs will eventually lead to a 5% increase in prices.

          • stock2mal says:

            [no]

          • Charles Bronson says:

            That’s not quite how it works. If the increase in wages reduces turnover and training costs and increases productivity, the company may very well save money. Part of the point of the study is that wages are not directly related to costs, profits, sales, or anything else. The idea that minimum wages will inherently harm business is ludicrous, it will only harm businesses that are poorly run and have no ability to adapt to economic changes (which are inevitable, wage laws or not).

            One of the things most folks against wage laws miss is that part of the reason the West has progressed to be so far ahead economically is that by increasing the cost of labor, we’ve encouraged investments in automation and efficiency. All the poor places on Earth depend on people to do manually what we automated decades ago due to high labor costs. Now our labor force is largely freed up to focus on higher-level tasks like watching TV, downloading porn, or starting world-changing technology companies in the garage. (nobody promised we’d all use the extra time for something productive, but as long as a few people do, our entire society benefits).

            In the first world, technology is cheap but people are expensive. In the second/third world, people are cheap and technology is expensive. Anyone who wants to live in a society that is advanced, comfortable and luxurious should do everything they can to fight the idea of cheap labor. Cheap labor is only good for a nation of ditch-diggers.

      • Keith is checking the Best Buy receipt of a breastfeeding mother (for tips!) says:

        Can you give me an example of an employer who wants unskilled, inexperienced workers, lower wages aside?

        • VeganPixels says:

          I’ll go with “Customer Service” and “Technical Support.”

          • Mphone says:

            100% true.

            I worked for DirecTV for nearly 4 years. I had good scores and times. My QA was always tops. However, they were more interested in getting rid of me and replacing me with someone less skilled and knowledgeable because they could pay them $3.50/hr less. So they did the first chance they got.

        • mac-phisto says:

          radio shack. no joke. i stumbled on a presentation for mid-level management on the optimal employment strategy: high turnover = more profits. see, according to their pretty little slides, a worker’s performance in selling high-profit products & services at the shack climbs rapidly within the first 6 months of employment, then drops slightly & plateaus. their goal was to replace the worker as close to the dip after that apex as possible. by doing that thousands of times, they would increase productivity & profitability by some minuscule percentage that’s only impressive when you multiply it by the thousands. radio shack: taking margins to the limit.

          & if you walk into a radio shack today, you’ll likely see the results of that little experiment: a single 20-something employee that is both incapable & unwilling to help you with anything substantial.

    • kc2idf says:

      You assume much.

      Not all businesses are corporate. Matters like this affect small business as well as corporate. That said, the closer the management is to the trenches, I think the more compassionate they are to the needs of the front-line workers. In many cases, you will even find that the owner is a front-line worker. Hell, in such cases, you will even find that they’ll bend over backwards to meet your needs.

      By the way, I am a small business owner and I work the front lines.

    • DanRydell says:

      I’ve worked for several of those profit hungry companies that employ young, unskilled, low-cost workers. I never made minimum wage, my starting pay was always higher.

  2. Loias supports harsher punishments against corporations says:

    It doesn’t surprise me. Businesses that employ minimum wage workers already keep costs down to the minumum, at all costs (pardon the pun) sometimes even at the cost of customer service. So that means having the fewest workers possible. Changing the minimum wage doesn’t change the minimum number of workers it takes to run a business.

    Regarding the turnover, I wonder if that was due to the fact that it was county-based only. Meaning, why would a minimum wage worker even attempt to find a job in an adjacent county when jobs in his county pay more by law. Once the employee limits himself to only one county, he’s drastically dropping his employment opportunities. Hence lower turnover.

    • nova3930 says:

      Except when businesses start looking for and finding technological solutions to reduce their labor force. The self checkout lanes at the grocery store that everyone seems to hate are a direct result of the increasingly high cost for labor mandated by various levels of gov’t. A one time capital investment gets you a “worker” who will stand there and do its job all day every day without a break and without bitching, won’t take sick days or vacation and doesn’t require regular pay or benefits.

      As far as your second point, self selection bias is probably only one of many problems with this study. I imagine this “study” will be shot full of holes in short order but we’ll probably never hear about any of the published rebuttals…

      • RTWinter says:

        I work in retail, and we have 4 self checkout counters. We still have at least 2 cashiers monitoring them at all times. They don’t really save time or labour, don’t see why we have them.

        • RTWinter says:

          Oh, not to mention they are always jamming/not working properly.

          • raydee wandered off on a tangent and got lost says:

            There are self-checkout lanes and self-checkout lanes. Some businesses, I will avoid their self-checkouts no matter how long the lines, and others, I go for them every time. It really depends on the machines themselves and the people monitoring them.

      • JollyJumjuck says:

        If companies treated workers like assets instead of expenses, and like human beings instead of inconvenient things, maybe the bitching and the “sick days” would be a bit less. I know there are lazy workers. I also know there are management personnel that are tantamount to slave drivers, and executives who consider themselves undeservedly far superior to their employees. Don’t just feel sorry for those poor, poor millionaires and billionaires because they are forced by the government to pay hard-working employees a living wage.

        • TouchMyMonkey says:

          They’re a pain in the ass. Say you go to the grocery store and buy a pack of razor blades. You scan them, then put them in the bag. The putting them in the bag part is not optional; the machine will stop working and yell at you if you don’t. Now, a pack of razor blades doesn’t weigh enough to fall all the way to the bottom of the bag, where the scale can weigh them and verify that you put the item in the bag like you were supposed to. So it yells at you, stops working, and the cashier has to come around, figure out why the machine isn’t working, and override the trigger that caused the stoppage.

          Meanwhile, somebody else wants to buy a 30-pack of Coors Light. The machine can’t verify if you’re over 21. The cashier, who is busy helping you finish your purchase of a pack of razor blades, will be a minute (or two) coming over to punch in the code to verify that the guy buying beer is over 21 (the lack of hair on his head is a dead-giveaway, and a live cashier would have figured it out instantly).

          Meanwhile, another customer has problems finding the code for some rather exotic form of fresh produce. The stickers that were put on each piece of fruit have all come off (the little old lady buying it couldn’t read them anyway because she left her reading glasses at home) and the cashier, after verifying that the Homer Simpson looking guy buying beer is over 21, has to look up the code so it can be entered on the touchscreen.

          Meanwhile, yet another customer’s debit card stopped working…

          Self-checkout sucks donkey balls.

          • MustWarnOthers says:

            Continuing the topic of the self checkout lanes sucking donkey balls, don’t forget to include the fact that EVERY and I mean EVERY single self checkout late monitor, doesn’t do a damn thing unless a machine tell them to.

            I’m very, very respectful and patient of grocery store employees. I used to be one, and I worked pretty hard.

            I look cashiers/baggers in the eye and genuinely thank them for bagging for me (which I also assist with, unless I’m getting in the way).

            The Self Checkout lane watchers always stand there doing nothing, instead of bagging like they should be. In almost every situation you have to go get them, because they are completely inattentive to any of the problems going on with the self checkout machines.

            In short, the self checkout lanes suck donkey balls, and they influence the employees who tend them to suck donkey balls at their jobs as well. Maybe those employees have a deep rooted hatred for the machines too and it affects their job performance?

          • jesirose says:

            The self checkout sucks for people who can’t figure out when it’s appropriate to use them.

            I usually DON’T use them because of all the other idiots using them. I also prefer companies keep paying staff, rather than buy these things.

            The self checkout is for 1-10 items, and NO beer, cigarettes, large items that won’t fit in the scale. Most of the scales can handle small items.

            • reishka says:

              Maybe it’s just where you are, but we have self-checkouts for those with more than 10 items. We have some specially designated for 10 or less, but we have 2 or 3 for those with more than 10 items. My husband and I will tag-team scanning and bagging and will have our transaction done in about the same time as going to a regular checker, without having to wait in line (usually), and with the added benefit that my items are bagged and sorted the way that I like them (ex: No stupid baggers putting my fruit/veggies in with canned goods, or contaminating my fresh food with my meats, and whatever needs to be double-bagged is done so without me having to ask). Also, what harm is there in pressing the “customer service” button and continuing to scan your items while waiting for the floating CSR to come over and check your ID for your beer? It’s not taking up any additional time, except for the 5 seconds or so it takes the person to look at my ID.

          • PsiCop says:

            Re: “Self-checkout sucks donkey balls.”

            Indeed. In addition to all the problems you cited, there’s the problem that they’re often hypersensitive, flaky, and not standardized. A lot of them have sensors to see if you’ve sent whatever you just scanned down the belt … if the sensor doesn’t find it in time, the machine locks up until it does. Even if you DID send it down the belt, the thing just never sensed it.

            A lack of standards is a less obvious problem, but it is one, nonetheless. Take coupons as an example. Some stores force you to scan coupons after the item it’s for; if you do it later, you’re SOL. Some force you to scan them all at the end of the order and won’t let you scan them with the item. Still other stores won’t let customers scan them at all, an employee needs to do it.

            But … here’s where the problem lies … no self-service machine I know of, tells you any of this when you walk up to it, or even after you’ve started scanning items. You’re forced to guess which is the case. There’s really no reason for having to guess, however … independent standards could easily decide such things. In that case there would be no guesswork.

      • human_shield says:

        I love the self checkout lanes. I just wish people who can’t use them properly would go stand in the regular line.

      • Kavatar says:

        Did you really just say self checkout lanes exist because of government regulation?

      • cspirou says:

        So do you see technological advancement as a bad thing? Is it much better to use several people to harvest corn then one large machine that does it in a few hours? This sort of Luddite thinking limits innovation. If someone’s job gets replaced by technology then it frees up the labor market for more productive uses.

  3. AustinTXProgrammer says:

    Ok, I’ll bite and say the study is accurate… What about inflation?

    • madmallard says:

      i’ll bite too.

      so the only complaint left is that minimum wage hikes generally benefit union wage scale the most and everybody else the least?

      • huadpe says:

        No, they inflate consumer prices.

        Let’s take a McDonald’s meal. Let’s say a McDonalds serves 1 person every minute in an 18 hr day, and employs an average of 4 people at a time over that period, paying minimum wage.

        So 18*4*$7.25=$522 in salary per day (before taxes). With 60*18=1080 people served, that comes out to $.48/person served. Let’s assume an increase to $8.25/hr, we then get $594 in salary per day, or a cost of $.55/person served. Here comes the $1.07 menu!*

        *Yes, I realize the median sales volume is much higher than $1.00, and thus the percentage inflation would be lower, but still there is likely to be price inflation, particularly when every business is forced to pay the higher wage, which will tend to curtail competition among sellers.

        • kmw2 says:

          Inflation happens with or without minimum wage increases – only, without minimum wage increases, minimum wage earners can buy less and less. Inflation is primarily driven by those that can actually afford to buy stuff.

          • chuckv says:

            Inflation is the result of an increase in the money supply relative to the increase in productivity of an economy, not consumer actions.

            • huadpe says:

              General inflation is, though it can also be due to an increase in exogenous demand, which is a consumer action. Also, the money supply is itself a variable, the primary factors being the velocity of money, the monetary base, and how you define money. (Compare, for example M1, M2, and M3 (former) published by the Federal Reserve)

              If you want a general overview, try Milton Friedman’s Money Mischeif. If you want an incredibly detailed view, try Monetary History of the United States by Friedman and Schwartz.

              • kujospam says:

                Correct, when an employee asks for a raise. That increases inflation. When Shareholders demand more profit for the same thing, that increases inflation. Same with CEO’s after all they are an employee. This is in general. Now if the work that they do is based off of piece meal work, then you can easily show if what they are asking is inflation based (excessive demand) or actually work/productivity increase earned.

        • Robert Nagel says:

          I was amazed when my son-in-law told me that at the Chic-fil-et where he worker there were 80 employees. And they are only open 6 days a week. Re-figure your example with this population and see what happens to costs.

        • Gulliver says:

          Ah, but you forgot the other side of the coin. MARKET PRICING. People do not price based on cost (if they do they are stupid). The market will dictate price. The other thing people forget is if that McDonald’s worker makes more, they typically SPEND more. Funny how that works. When high paying union jobs were the norm in Michigan, it was one of the wealthiest states int he country. As those jobs were swapped for lower wage jobs look what happened. Higher wages in a community equals a better economy.
          As an aside, I wonder how many of you know what a typical McDonald’s makes in free cash flow (revenue minus expenses) each year? Many businesses which lose money, do so from things like depreciation, or their money paid on their loans (which have no bearing on profitability)

          • huadpe says:

            A few things:

            I was not analyzing the overall impact of a min. wage increase, merely the question of whether it causes inflation. My view is that the primary impact is negligible largely due to the black market for labour, which absorbs those who would otherwise be unemployed at min. wage (particularly recent immigrants and/or people with insufficient education to read basic instructions effectively).

            Market pricing has a floor at marginal cost, with no firm being willing to sell below MC. If you raise MC, you will cause inflation, assuming efficient markets before the price floor on wages is introduced.

            If I had to do a Fermi estimate for revenue from a typical McDonald’s I’d say $12/min gross revenue between 11:30 and 23:30, $4/min gross revenue between 23:30 and 5:30, and $6/min gross between 5:30 and 11:30. So looking at $8.50/min over a 24 hr period, assuming a 30% food cost gets you $5.95/min gross profit before wages/mortgage/other costs, or about $8500-9000 per day in food profit.

        • wildgift says:

          A CEO doubling his salary from $1 mil to $2 mil should have the same inflationary effect as 2000 minimum-wage workers getting a 25 cent raise. But one difference is that the 25 cent raise will be spent rather than invested, and circulate around the service economy rather than between Wall Street traders.

        • Snowblind says:

          You failed to include payroll taxes that the employer must pay, which is about 40%, depending on the state. So if you make $7.75, the real cost is $10.15, and if you raise it to $10, the employer pays out $14, $4 of it going to the government.

    • sonneillon says:

      Well. I got a degree in this and I can say it depends.

      Minimum wage increases generally don’t effect inflation or unemployment unless they are extreme increases which we don’t see here. If minimum wage jumped from 7.25/hr to 13/hr there would be an increase in unemployment, but generally minimum wage increases in the US are pretty reasonable.

      Now in regards to inflation and unemployment. Directly inflation and unemployment are not related except that when we use our monetary policy to fight inflation unemployment goes up and if we use our monetary policy to fight unemployment inflation goes up. When our unemployment goes down (and it will) expect inflation to go up because of our use of monetary policy to fight unemployment.

  4. kmw2 says:

    This is not news, it’s a result that’s been seen again and again, as far back as Card and Krueger’s research, published in 1993.

    • Michaela says:

      Yeah. Considering we just covered this in my microecon class, I would assume that this isn’t a new idea. The economic models support it so well.

      • ldub says:

        Yes, but since the rightwingers insist on trotting out the same old inaccurate economic beliefs over and over again, they need to be refuted over and over again.

        • mythago says:

          But you can’t ever really refute them. it’s not about facts, it’s about an ideology (minimum wage laws make Adam Smith cry). They don’t actually care about the facts except to the extent they can pretend it supports the philosophy.

          • kmw2 says:

            minimum wage laws make Adam Smith cry

            Except they don’t. Poor Adam Smith. He was pretty clear on the whole “you have to pay people enough to eat” thing.

            • mythago says:

              I know. I should have been clearer that I was referring to the imaginary Adam Smith from the Bizarro Ayn Rand Universe usually cited by people who think that a belief (government bad!) is interchangeable with facts (the minimum wage does not cause a short-term hike in unemployment).

          • DH405 says:

            “A man must always live by his work, and his wages must at least be sufficient to maintain him.” – Adam Smith.

            Funny how people will remember “great” men however is convenient.

    • nova3930 says:

      You mean C&Ks exceedingly flawed research that in no way shape or form accounted for a laundry list of extraneous effects? A 20 year old firing range target has fewer holes shot in it than that research does.

      Far be it from me to intrude on the liberal fantasy world of “businesses magically hire more people when it costs more” though. Go back to your regularly scheduled unicorns and leprechauns…

      • kmw2 says:

        You mean the study that’s been replicated again and again, while there has never been evidence to suggest that increases in the minimum wage actually increase unemployment? Yes, that one. I guess I’ll go back to my little fantasy world of empirical evidence and leave the hard stuff to you ideologues.

        • Akuma Matata says:

          It’s certainly possible that an increase in the min wage doesn’t increase unemployment, but it certainly doesn’t decrease it either. A business won’t magically hire people when their costs to do so increase

          • Brunette Bookworm says:

            No, but more money in a person’s pocket means more spending, which increases demand and can increase jobs. There is a lag in demand creating jobs but one of the problems right now with the economy is people aren’t spending. Part of that is lack of confidence in having a job but part is that they don’t have the money to do so. Working in an industry that is subjective to customer demands I’ve seen how much lower our sales are now. Because of this we’ve laid people off. We just don’t have enough demand to justify keeping that many people and manufacturing that much stock when we aren’t selling it. If the rate we make the stuff is higher than the rate we are selling it, that’s bad. It costs money to create and money to store.

  5. Cicadymn says:

    herewego.jpg

  6. dreamfish says:

    I’m sure pure free market and rah-rah-capitalist types won’t let these facts get in the way of their crusade.

    After all, I remember some years ago one CEO once saying in an interview “you have a choice – you can either have a low wage or no wage”.

    • Akuma Matata says:

      I’m just curious why the gov’t should be allowed to involve itself in the voluntary transaction between 2 parties, so long as neither party is committing fraud.

      • dreamfish says:

        Erm.. to prevent abuses? After all, practically all libertarian arguments about the wonder of the free market are based on a perfect ideal of it that doesn’t exist, never has and never will.

        • MrEvil says:

          Yeah the ideal libertarian capitalist society can’t ever exist because people are assholes. Until we can eliminate every asshole from the face of the planet there is NO HOPE that we can have such a society.

          It’s also the reason we can’t have an ideal Marxist communist society….people are assholes.

          • Bativac says:

            This is the truest explanation of why pure free market doesn’t work. I am an unabashed libertarian but I agree — it only works when people are decent. The fact that most people are real bastards, especially when they run a business and start making money, throws a monkey wrench into the whole system.

            • dreamfish says:

              I could have guessed you were a libertarian from your comments, which boil down to:

              “The only reason we don’t have a perfect society is because people aren’t perfect – it’s all their fault!”

              Meanwhile, back to reality…

      • peebozi says:

        Yea, it’s about time we let monopolies again…which would eventually result in one single monopoly and we’d all be “co-workers” living high on the hog!

      • Brunette Bookworm says:

        Because one side has proved itself unable to be fair? Yeah, it would be nice but people aren’t always nice. The laws were enacted after abuses by employers of the employees. They aren’t there because of hypotheticals but because of real problems that existed. If you want to go back to child labor, businesses changing rules on pay after work is done, and people being fired because they reach a certain age, well, then go ahead and try to abolish the Fair Labor Standards Act.

  7. mynonys says:

    Who’da thunk it, employers don’t hire people just because they feel like it and can afford it, they hire people because they require someone to do the job they’re willing to pay for.
    That need doesn’t go away just because you’re paying someone more.

    Turns out that the people doing the employing know a thing or two about business- they’re not going to spend extra money unless they absolutely need to, and that need doesn’t suddenly change when the amount of money involved does.

  8. AustinTXProgrammer says:

    So I haven’t considered the unemployment argument much. Usually I read about the Unversal Living Wage, where the minimum wage would be tied to housing costs.

    All i can see is a perpetual cycle where wages and the cost of living go up. There is a finite amount of housing, so prices go up and the same people can afford it. Sure someone might build more, but the costs to build it just went up too. Next time the look at it they raise the minimum wage. The costs to the service industry are higher, so food costs more too.

    Can we get a study to compare the cost of living to the minimum wage? How would we control it? We want to see minimum wages effect on the cost of living, not the other way around.

    • AustinTXProgrammer says:

      Before I get flamed please look past my typos. I really need to stop posting in a hurry so I can proofread.

    • Kate says:

      There’s a lot more to the cost of living than the wages of minimum wage workers in your area. Off hand, I wouldn’t see that it would have much impact at all. Maybe the McDonald hamburgers might go up a dime.

    • evnmorlo says:

      Mortgage rates are probably half what they should be, so should the government decide to notice inflation it can instantly halve the value of the nation’s real estate. And even in the service industry which sells products that cost almost nothing, wages might only be 25% of the product’s price, so doubling wages would only raise the price by 25%. Business may want to price what customers can pay to boost profits, but if capitalism works at all a competitor will undercut them to price the product a little above what it costs to make.

  9. Student Boy says:

    Proof the minimum wage is good for nothing.

    Unless you count driving up the price of running a business, which in this economy is not a good thing to do.

  10. chaesar says:

    can I get a “no sh*t”

  11. balthisar says:

    Economically, it would depend on how much you raise the minimum wage. Remember, you’re talking about a measly 3% of American workers. Minimum wage increases are always political grandstanding, because the increase is always marginal.

    I’d like to see this study done for “living wage” areas. There’s a [i]huge[/i] difference between mandating $7.25/hour vs. $25/hour.

    All the same, this is just one study versus many others with different outcomes.

  12. mythago says:

    It’s only one study, it doesn’t affect anyone, it’s probably not true…what are we missing? The study authors are secretly in the pay of the Obama political machine?

    • Mom says:

      This is one study, yes. But its results are consistent with other similar studies.

      • mythago says:

        I know; but we’re already getting the comments from people who believe as a matter of philosophy that the minimum wage is immoral government interference in the private market.

        • huadpe says:

          I just think it causes a marginal increase in black market employment relative to on the books employment. The US has a large and thriving black market for employment. The main downside of which is the lower tax revenue, as well as the greater potential for worker abuse.

  13. crashfrog says:

    Study Shows: Liberals continue to be right about everything

    • nova3930 says:

      Study Shows: Liberals woefully ignorant in basics of economics….

      http://online.wsj.com/article/SB10001424052748703561604575282190930932412.html?mod=WSJ_Opinion_LEADTop

      “Basic economics acknowledges that whatever redeeming features a restriction may have, it increases the cost of production and exchange, making goods and services less affordable. There may be exceptions to the general case, but they would be atypical.

      Therefore, we counted as incorrect responses of “somewhat disagree” and “strongly disagree.” This treatment gives leeway for those who think the question is ambiguous or half right and half wrong. They would likely answer “not sure,” which we do not count as incorrect.

      In this case, percentage of conservatives answering incorrectly was 22.3%, very conservatives 17.6% and libertarians 15.7%. But the percentage of progressive/very liberals answering incorrectly was 67.6% and liberals 60.1%. The pattern was not an anomaly.”

      • dolemite says:

        Boy are those some loaded questions. They barely quantify any of their questions.

        “Mandatory licensing of professional services increases the prices of those services”. It doesn’t mention the cost of the license, field involved, etc.

        “Third World workers working for American companies overseas are being exploited.” Some are. Some aren’t. Perhaps if they specified their wages, working conditions, or even the freaking country?

        “Free trade leads to unemployment.” Depends on whose employment you are talking about. If you ship programming jobs to India or Pakistan..American unemployment of programmers will go up, while the overall employment stays the same.

        What a piece of shit “study”.

        • mindaika says:

          Well, the main difference is this article cites an actual study whereas the wsj article is a survey.

      • mythago says:

        You’re citing a Wall Street Journal opinion piece for facts? bwahahahahaha

      • kmw2 says:

        Econ 201: Everything you learned in Econ 101 is actually either wrong, simplistic, or a lie, sorry. Too bad more people never get there.

        • nova3930 says:

          Sorry, Daniel Klein is a professor of Econ @ George Mason, so he probably knows a bit more about the subject than you and me put together. Nice try though…

      • Gulliver says:

        “The other questions were: 1) Mandatory licensing of professional services increases the prices of those services (unenlightened answer: disagree). 2) Overall, the standard of living is higher today than it was 30 years ago (unenlightened answer: disagree). 3) Rent control leads to housing shortages (unenlightened answer: disagree). 4) A company with the largest market share is a monopoly (unenlightened answer: agree). 5) Third World workers working for American companies overseas are being exploited (unenlightened answer: agree). 6) Free trade leads to unemployment (unenlightened answer: agree). 7) Minimum wage laws raise unemployment (unenlightened answer: disagree).”
        1. Show some evidence that licensing leads to higher costs? In fact, I would argue licensing leads to lower costs BECAUSE it means less risk involved. I hire LICENSED plumbers because I am not a short term thinker. A car that costs $25k but lats 10 years is better than one that cost $10k and lasts three years.
        2.The standard of living IS lower than it was 30 years ago for many. The middle class has a lower standards than they did in the past. Many families could live off one income 30 years ago. Not so much now. I guess standard of living is based on what you accept as a standard
        3. Rent control leads to housing shortages: Where? Are you having trouble finding housing in most parts of the country? I did not hear landlords crying during the boom years when the value of their property skyrocketed unrealistically
        4. Not all, but many are. When Microsoft had an EFFECTIVE monopoly it allowed them to fill their products with anti competitive products to keep out competitors. That is the crux of the issue. Businesses being allowed to FORCE shit on you when you don’t want it, or by stifling competition.
        5.This is a crazy question. YES, they are. If I am forced to work there due to illegal slave trade, male “ownership of women, or children working in UNSAFE environments it is pure exploitation. In many countries (China), you can not just leave your job.
        6. Free trade leads to unemployment. UMM, it does. See China GETS the job and Americans buy their products for cheap. If there were true “free trade” with all sides playing by the same rules you would be correct. It is like asking a baseball team to have 4 outs in an inning, while the other one still has three
        7. I guess the study and all like it prove this theory wrong on their part.

        The fact is this “research” made arguments not based on scientific data, but opinion of what they THINK the model should look like.

        • nova3930 says:

          Liberals prove once again, they’re too fucking dumb to understand simple survey results of basic economic understanding.

          • DeepHurting says:

            Everyone once again proves that they can’t have a civil disagreement without resorting to banner-waving, insults and name-calling.

    • john says:

      +1, for funniest joke of the day!

  14. TuxthePenguin says:

    If that’s the case, why don’t we raise the minimum wage to $100,000 a year? Its not going to reduce unemployment… but I guarantee that it will increase inflation…

    Actually, digging through the article, there are a few interesting graphs. Figure 1, for example. Its measuring the growth. Interesting.

    However, I think that the study comparing cross-state border is a bit off considering the standard explanation about minimum wage. When the wage gets raised nationwide, unemployment among that cohort rises. This study can’t deal with that.

    • RvLeshrac says:

      That’s partially because it takes a period of financial hardship to push minimum wage increases through.

      Correlation is not causation.

    • mythago says:

      Wow, what a great argument. Let’s cut the minimum wage to 1 cent an hour. Then everybody will have a job and there will be no inflation!

    • IThinkThereforeIAm says:

      Because there is an unvoiced implication in the study:
      To properly rephrase the title (spelling out the implied), it should say:
      “The currently observed/implemented minimum wage policy does not increase unemployment”.

      I don’t see anything saying the ANY kind of minimum wage increase would work the same way…

    • eyesack is the boss of the DEFAMATION ZONE says:

      Because these researchers got paid and crunched the numbers to study the effects of things that actually happen, not bullshit unicorn scenarios that would obviously completely change everything in the economy?

  15. psm321 says:

    Duh. Same as the argument about taxes. It’s actually a very capitalist argument. Raising a company’s cost doesn’t mean they can automatically run with fewer people or raise prices if the market won’t support those higher prices. Instead, they have to cut in to profits.

    • nova3930 says:

      Which cuts into capital accretion and thus expansion and thus the ability to employ more people long term.

      All this study shows is that in the short term, employment isn’t affected (and there are other reputable studies that dispute that which nobody around here deigns to admit to) but says nothing and can’t say anything about long term employment impacts.

      • Beeker26 says:

        Not really. Businesses only expand when they believe there will be an associated profit; they don’t just hire new workers for the hell of it. This is why trickle-down economics has always been a miserable failure. The assumption that businesses will funnel increased profits into expansion and new jobs is a fallacy. 95% of the time it just goes into their wallets.

  16. captadam says:

    What’s this! Next, I’ll hear that tax cuts don’t REDUCE unemployment!

    • Gulliver says:

      Actually go back and read about the Clinton tax cuts and graph unemployment, Amazing how that worked, more taxes and lower unemployment. Seems liek the real world wins again.

  17. Robert Nagel says:

    Tell that to inner city kids who can’t get a job because the minimum wage has passed their ability to produce.
    It is an economic truism that whenever you increase the price of something the demand goes down. Just because these “economists” managed to find an atypical situation doesn’t change this. The minimum wage is increased very infrequently and often in response to prosperous conditions. This has a tendency to mask the negative effects of the increase.

    • mythago says:

      Is there a reason for the scare quotes around “economist” other than, you don’t like the results of the study?

      • Robert Nagel says:

        No, I have a degree in economics and I resent people tailoring their studies to their particular desire. If you check into the background of these people I am sure you will find a liberal bias. Economics is the study of human behavior, especially the reactions to incentives, both positive and negative.

        • mythago says:

          So, you haven’t looked into the study, you don’t know if the authors have a liberal bias, but because you don’t like the results they’re not merely wrong, but dishonest?

          Perhaps you could put that economics degree to use, look at the study and explain to us all why it is incorrect, rather than trotting out LIBERAL BIAS WHARRGARBL.

          • Robert Nagel says:

            When the intro to the programming is by Noam Chomsky you can be sure that it is not only liberal, but bat shit liberal.
            I listened as long as I could. The study by Card and Krueger was limited by the small sample that used. The employment between Philadelphia and New Jersey was affected by many other factors. I can’t cite the study, but their study was vigorously challenged. The time period used was a time of great economic expansion, masking the effects of the minimum wage increase. In a time of increased activity some areas and/or states will have differing reactions. Philadelphia, with its’ myriad problems may have fared worse due to these factors and not the lower minimum wage.
            One result they showed was valid. The quality of the worker was raised, turnover was reduced and costs resulting from these benefits were shown. However, increased profits from better workers has nothing to do with employment. On the other hand, higher quality workers, ie. retired people, must necessarily mean that lower quality workers, ie. inner city youths, would be displaced and their employment increased. Not especially a good impact on inner city youth even as it aids older, retired workers to occupy their time and augment their income.

            • Robert Nagel says:

              Error alert. Second from last sentence. Inner city youth UNemployment would be increased.

              Sorry.

            • mythago says:

              Programming? What are you talking about? I’m referring to the actual study linked in the Consumerist article, which was published in The Review of Economics and Statistics this November.

              • Robert Nagel says:

                A previous post referred me to the “Real News Channel” on the internet. The economist who authored the study you referred to seems to be a serial contributer to the channel. The news channel is introduced by Noam Chomsky. The other contribution by him was just a left tilted. He admits that he did the study to investigate the possibility that a rise in the minimum wage would not result in unemployment.

                • LadyTL says:

                  All studies are done to investigate something otherwise they would just be opinion pieces with no need to look for any facts.

                • mythago says:

                  So, you don’t have anything to say about the actual study itself; but in your mind the fact that a show that featured one of the study’s authors also promotes Noam Chomsky means the study is garbage?

    • kmw2 says:

      Funny thing about truisms: They’re so very often wrong. For example, raising the price of relatively inelastic goods doesn’t drive down demand much, because people still need it. One example of an inelastic good is labor. Sure, companies can increase labor efficiency and eliminate some jobs, but that has limits, especially in the service industry (which is where the majority of minimum wage workers are employed in the US.) If a small business has already cut their workforce to the bone and they absolutely need 5 minimum-wage workers to operate? They’re not going to fire one because everyone else got a 25-cent raise. I have an economics degree too, but I didn’t need it for that analysis – it was all included in the intermediate micro theory class I took my sophomore year. Maybe you should put that economics degree to better use instead of whinging about “liberal bias”.

      • Robert Nagel says:

        Labor is structurally inelastic. People resist a decrease in wages. This makes it appear to be an inelastic good, when in actuality it only appears so.
        Whether it is inelastic or not the measure to be observed is how inelastic is it. It is not rigid. An increase in price will result in a decrease in demand in almost every case.

        Irish potatoes are the exception. When the price of potatoes went up the demand went up. Why? Because the Irish peasant could no longer afford meat and had to buy more potatoes to maintain their caloric intake. Just like the Card and Krueger study, there will always be the exception.

        • kmw2 says:

          Um, you know you’ve actually got that backward, right? Maybe you should have paid more attention in your basic econ classes.

  18. Kevin says:

    Did we really need a study for this? At a given price point for a product or service, I can have 15 full time employees at $10 an hour or I can have 10 full time employees at $15 an hour. I can’t do anything with my labor budget and stay competitive so I’m just going to have to drop jobs when minimum wage goes up.

    Minimum wage issues are only part of a larger problem. Government overinvolvement, regulation and the insanity of a 35% corporate tax are the real killers to our nation’s industry.

    • prizgrizbiz says:

      Shame on you, logic is not allowed here, when it gets in the way of the idealists.

    • kmw2 says:

      The problem is, of course, that actual studies (multiple actual studies, some conducted by neoliberal economists) have proved your analysis is incorrect. If a company needs 15 workers, they need 15 workers, and they’re going to keep 15 workers even if those workers get a little bump in their paychecks. You know how the same way you get a raise every year, and yet your employer manages to stay in business despite their shocking generosity? That goes for minimum wage workers, too.

    • Robert Nagel says:

      Kevin,
      Your actual response in a situation of rising costs, and stagnant demand which will not allow you to recoup those costs, will be to eliminate jobs in their order of profitability. The least profitable job will be eliminated as soon as it can no longer generate enough revenue to cover its’ costs. There is always a hierarchy of jobs from most to least profitable. Maybe all the jobs will remain profitable and all will be retained even though you can’t raise prices. On the other hand, in the real world, you may have to cut the least profitable and may in fact have to cut all of the jobs and go out of business.
      No one has repealed the laws of economics although many have tried. Engles, Marx, Mao, etc.

    • kabamm says:

      *sigh* As if any big companies actually pay that 35%. GE – zero, Ford – zero, Bank of America – zero, etc. ad nauseam.

    • Apeweek says:

      Hey, your facts are all up in my ideology! Stop that!

  19. Kylesaisgone says:

    This ‘study’ methodologically false. Why would anyone believe this kind of tripe. Oh wait, let’s compare the effect of a minor increase in minimum wage versus that of an area with no increase, and if unemployment doesn’t rise in the increased area, then the minimum wage isn’t an economically harmful public policy!

    Is this a joke?

  20. mszabo says:

    Study seems somewhat wierd in that it’s “primary focus is on restaurants”. That seems like an industry where some of the negative effects attributed to minimum wages would have the smallest effect. Everybody desires a place to eat out and that desire is where people live. So its not like McDonalds could move all of its franchises to the neighboring country to take advantage of the cheap labor. All the anti-minimum wage propoganda I’ve heard tends to use the industry will move elsewhere.

  21. Gulliver says:

    The problem those who want to think they have some economic insight on this fail to realize is if elasticity of demand was based on price, then why was the Yugo not the number one selling car in the world? Why isn’t the cheapest brand of jeans more successful than say Levis? How do gas stations on a corner have four prices, yet people get gas at all. Price does not drive buying decisions. Here is how it works, All businesses in TOWN A raise the minimum wage. All those people now have more money to spend on rent, houses, food, entertainment etc. As they spend that money those businesses that now have higher wages will also make more money. Economies of scale dictate that volume hides sins. The fact is, most businesses do not run at capacity. Which restaurant will do better financially? One that makes $2 per plate and sells 1000 per night, or the one that make $10 per plate and sells 100 per night.

    • Robert Nagel says:

      The Yugo was unsuccessful because people were able to differentiate between the quality of a Yugo and other cars. If, on the other hand, a product is fungible then there will be some kind of elasticity of demand. Corn is fungible and will be rationally demanded based on price. BMW’s are not fungible and will therefore be priced based on the perceived value of the buyer.
      Price does drive demand. However, to the extent that producers are able to differentiate their product they are able to get differing prices for their products. While there may be four gas stations at a corner the demand for gas will be partially driven by perceived value differences. BP may suffer because of the gulf spill, Shell my profit by a perception of superior quality and the other two discount stations may derive demand by offering a discount. Whatever the result it will be the result of rational decisions to maximize satisfaction based on an analysis of the differing prices and qualities.

  22. jbandsma says:

    The minimum wage has been said to increase unemployment every time it’s been brought up for an increas. EVERY time. Hasn’t ever been shown to be true.

  23. duxup says:

    I think factors like education, taxes, job competition, and a whole mess of other things play into the economy in such complex ways that it is nigh impossible to predict the outcome of changing just one variable.

  24. voogru says:

    Great, let’s raise min. wage to $30 an hour, that way everybody can have a great life.

    /sarcasm.

  25. u1itn0w2day says:

    Oh great we’ll wind up like alot of European countries where the fulltime work week is around 35 hours and you can retire at 55. How can accumulate wealth/retire/pay your way in a capitalist society with those kinds of numbers.

    • LadyTL says:

      Well, most of us can’t do that anyways on minimum wage and working part-time with barely any benefits at 35-39 hours a week, much less retire at all. So which of us is really better off?

      • u1itn0w2day says:

        That’s basically the sarcastic point I was trying to make. I’ve heard stories of people in retail being considered full time under 30 hours. Many companies consider full time the amount of hours you need to keep your benefits.

  26. u1itn0w2day says:

    If nothing else a minimum wage increase will slow down the Walmarts from becoming a mega monster corporation that actually winds up killing the competition that the stagnant minimum wagers supposedly want-free markets & competition.

    • wildgift says:

      Not really. When the MW goes up, so does the ability of MW workers to buy more products.

      • u1itn0w2day says:

        I don’t think minimum earners will rush to a Walmart if they get a raise but they might be able to do things like get their car fixed, go to the dentist, eye doctor, get caught up on some old bills etc.

        Without things like a low minimum wage and/or outsourcing overseas Walmart size companies would’ve never been able to expand to the point they did. They’ve might have grown but it would’ve been alot slower which would’ve left a lot more competition with employees and in many cases higher wages which would be spent a little more freely.

        Can’t stand government mandates but you something to balance out the exploitation of the labor and wage for corporate profit. And the laws & regulations their profit can lobby for.

  27. udesigns says:

    Nice to see a study reinforce it, but this has been known by anyone who has studied by economists for a loooong time.

  28. voogru says:

    Anyone who has studied fuzzy economics.

    How do people get jobs if the min. wage is above their skill level? How does somebody get a job when their labor is only worth $4-5 an hour and min. wage is $7.25?

    Would you agree to the government price fixing gasoline to $7.25 a gallon?
    Why would you agree to the government price fixing labor to $7.25 an hour?

    Have you ever noticed that whenever they increase min. wage, they need to do it again a few years later?

    Businesses adjusts their prices to account for the new labor costs, leaving people earning min. wage with the same purchasing power they had before. If you had an economy that turned on a dime adjusting the prices of their products to account for higher labor costs instantly, if you increase min. wage to $100 an hour, the prices of every single product would rise proportionally to account for the new wage.

    Leaving the people earning min. wage in exactly the same position they were in before.

    • wildgift says:

      If they are desperate enough, they allow the employer to steal wages. The most common forms of wage theft are not getting breaks, working through lunch, and working off the clock.

      See, you don’t even have to be creative to get around the minimum wage.

    • JollyJumjuck says:

      Yes, because labor costs are the ONLY thing driving up prices. (said with sarcasm, by the way). If you leave minimum wage where it is, the price of goods and services still keep climbing. Do you know what else drives up prices? Greed at the top. Amazing, isn’t it?

      For example, the minimum wage in Ontario was completely stagnant for ten years (1979 to 1989). Do you honestly believe that prices didn’t climb and climb during that time? All that happened is that people on minimum wage could afford less and less.

      • voogru says:

        There are a lot of things that affect prices, not just wages. Of course the prices went up, prices always go up because the currency inflates.

        If you increase the cost of labor, eventually the higher price of labor will be factored into the price of the end products.

        Why don’t we just do a $100 an hour? If increasing it from $6.00 to $6.50 is a good idea, and we don’t lose jobs, then $100 an hour won’t lose jobs either!

        In reality the only difference is the effects of the increase to $100 an hour will be felt much quicker because businesses would have to adjust their prices immediately, an increase from $6.00 to $6.50 will usually result in businesses adjusting wages later on so they can blame other reasons for the increase. So the worker gets an increase of purchasing power, but it will be short lived, eventually it’s going to be wiped out with higher prices.

        Here’s a fun fact, if WAL-MART paid every employee a measly $2.73 an hour more, they’d be in the red. For every $100 spent at a WAL-MART, they make $103.

        Now that’s some serious profit.

        • voogru says:

          Minor correction, for every $100 spent at a WAL-MART, their profit is $3, for a total of $103 dollars.

        • PunditGuy says:

          “Of course the prices went up, prices always go up because the currency inflates.”

          Well then, how about we raise the minimum wage to keep up with inflation?

          • voogru says:

            Why don’t we just eliminate inflation? Inflation isn’t some magical law of nature. Inflation cab be stopped tomorrow.

            But oh no! Money might become more valuable and the purchasing power of saved dollars might increase. This is horrible. We should be reliant on the banks for saving! /sarcasm

    • NeverLetMeDown says:

      Nobody’s talking about raising the minimum wage to $100/hr, or even $30/hr. Those are strawman arguments. What’s under discussion is modest increases in the minimum wage (i.e. $5 to 6.50 kind of thing). At that level of change, demand for low-skilled labor appears to be, based on the actual empirical evidence, very inelastic.

  29. BurtReynolds says:

    Of course it doesn’t. This is just another talking point sold by the GOP to protect their big business friends. Just like the idea that income tax reduces a person’s incentive to try and make more money and the “examples” of people that turn down raises because it would put them in another tax bracket.

  30. peebozi says:

    the publicly traded corporations want all the marbles.

    get rid of the minimum wage, it’s anti-competition and anti free-market!!!

    • voogru says:

      Who owns those publicly traded corporations?

      Do you have a 401k? Do you have a mutual fund? Then it’s probably you. Probably grandma.

      Greedy rich bastard.

      • u1itn0w2day says:

        But without enough pay many won’t be able to buy into a mutual fund or 401k. And unless those holding are mostly bonds the stockholder doesn’t really own squat except the right to buy and sell.

  31. AgostoBehemoth says:

    Agreed – it does not create unemployment.

    Instead of a “minimum” wage – companies should be required to limit exectutive pay & bonuses to a multiple of their lowest paid worker.

    I’d rather see “living wage” than “minimum wage”.

  32. EBounding says:

    I think it makes sense that the modest arbitrary increases in the minimum wage don’t necessarily increase unemployment. It’s obviously better for businesses to just deal with the increase and give more responsibilities to their current workers than to lay them off.

    But what the minimum wage does do is make lower-skilled jobs extinct and discourage future hiring. This is why you don’t see people who just pump gas for a job or theater ushers any more. The labor for these jobs may only be worth $3/hour, so it makes no sense to pay these people $7 plus workers comp. and social security. The study even mentions that their data couldn’t test whether restaurants responded to minimum wage increases by hiring more skilled workers or fewer less skilled ones.

    Even if businesses continued to hire like they normally would, they’re not going to eat the cost. If they can’t make a profit, they won’t desire to have a business. So if it’s not practical to layoff people, the business is going to pass off the higher cost of labor to the consumer in the form of higher prices. Apparently the Consumerist is ok with that.

  33. Unclaoshi says:

    We should all just work for free and change over to an honesty system where everyone gets their fair share or just what they need if no one gets paid we dont need to worry about inflation or unemployment because everyone has what they need! This will also cause gov regulation to stop and as people on here like to say companies will govern themselves so that problem is also taken care of, and well the whole world is going to do this so we dont have to worry about paying for import or exports! Boooyah where are economic degrees now!

    *Please note that most of this is sarcasm if you take any of seriously that sucks. Also a note about the note, it was put in because what is apparently sarcastic to some is not sarcastic to others.

  34. framitz says:

    A new study shows that increased minimum wage does not increase unemployment.
    What a revelation as if common sense is not good enough for such simplistic revelations.

    I wonder how much such a worthless study costs?

  35. XianZhuXuande says:

    History disagrees.

  36. WickedCrispy says:

    What about the item you’re all missing here: Small single businesses being able to afford a minimum wage increase vs a huge company like Wal Mart?

  37. jcargill says:

    I’ll be waiting for this story to end up on FOX. Holding my breath here…

  38. nerble says:

    As soon as I can regularly get my freaking hamburger right, I’ll be the first to champion minimum wage.

  39. no says:

    Every time the minimum wage goes up, I get closer and precariously closer to becoming a minimum wage employee. Pretty soon, I will be. Sigh.

  40. BytheSea says:

    Why would anyone think more money means more unemployment?