Talk:Minimum Wage

From Pete Ashdown Campaign Collaboration Wiki

The Republican leaders in Utah and the national GOP keep repeating that "Raising the minimum wage will cause job losses! Teenagers will not be able to get jobs!" The only real data analysis published on this issue comes from the Princeton economists David Card and Alan Krueger, who published their initial study, Myth and Measurement: the New Economics of the Minimum Wage(Princeton University Press, 1995)over a decade ago. It was the first analysis of real data to see if raising the minimum wage actually did lead to a decrease in jobs (in this instance- jobs in the fast food industry). Card and Krueger investigated the consequences of the 1991 increase in the US federal minimum wage, for employment in a sample of 331 firms in the fast- food industry in Pennsylvania, and 79 in New Jersey. In Pennsylvania raising the federal minimum wage had real effect, but next door in New Jersey, the state minimum wage already exceeded the new federal minimum, so the latter had no effect. Using an approach similar to "natural experiments" in the physical sciences, New Jersey's outcome was taken as the 'control' for Pennsylvania's 'event'. The study showed no negative effect on employment in Pennsylvania when the binding minimum wage rose - indeed, employment actually rose too. In New Jersey, where the new federal minimum was irrelevant and there was no change in the binding minimum wage, employment fell a little. This showed that - contrary to the expectations of most economists and virtually all Republican leaders - raising the minimum wage did NOT cause loss of jobs in the fast-food industry. This was published over a decade ago. Why are politicians still repeating the Myth that Minimum Wage Causes Job Loss?

The fast-food industries business lobby and right-wing conservatives were quick to attack the Card-Krueger study. The Employment Policies Institute (EPI), an employer-funded think tank opposed to the minimum wage, initiated a counter study. The EPI executive director Richard Berman (who is also a lobbyist for the fast-food industry), provided payroll-based data, (said to be from 71 fast-food restaurants in Pennsylvania and New Jersey), to David Neumark and William Wascher, of Michigan State University and the US Federal Reserve Board respectively. The results of this study (Neumark-Wascher 1)were directly contrary to Card and Krueger. Drawing on this rebuttal, scorn was heaped on Card and Krueger in Business Week and the Washington Post, and other influential journals. Closer to home, Judith Sloan proclaimed that Neumark/Wascher 1 ".....based on comprehensive payroll records of the fast-food industry in New Jersey and Pennsylvania, has overturned the findings of Card and Krueger". ["Price of Higher Wages is Jobs", The Australian, October 19, 1995]. Trouble is, scientific progress requires that scholars publish their work and make their data available, so that it can be pored over, tested, and checked by anyone who cares to do so. However, with respect to Pennsylvania and New Jersey restaurants, Card and Krueger's data is available on the Internet, but the Employment Policies Institute data is confidential! Apparently with a view to maintaining their scholarly reputations, and replicating the results of Neumark/Wascher 1, Neumark and Wascher did another survey of their own and have released the data(Neumark/Wascher 2) Neumark-Wascher 2 looked at a sample of 151 fast-food firms in New Jersey and Pennsylvania. It found no statistical effect on employment as a result of the minimum wage hike. Neumark/Wascher II does not damage the findings of Card and Krueger; rather it undermines those of Neumark/Wascher I. What is more, basic statistical tests suggest that the two Neumark-Wascher samples were not chosen randomly from the same population. If Neumark-Wascher II is a random sample of the Pennsylvania/New Jersey fast-food restaurant population, then the data for Neumark/Wascher I was either not randomly selected or was not drawn from the fast-food restaurants central to the original study. Yet most of the ammunition shot at Card and Krueger in this recent ugly skirmish was manufactured from Neumark/Wascher I. Please take note: numerous MSM print media, including the supposedly liberal Washington Post, happily joined in bashing the original Card & Krueger conclusions. They did not, however, follow up to find that they had been suckered - yet again - by pseudo-research in the form of Neumark-Washer 1.

Card and Krueger published an update in January 1998 (many years ago now). This later paper re-examines the effect of the 1992 New Jersey minimum-wage increase on employment in the fast-food industry. It finds “similar or slightly faster employment growth in New Jersey relative to eastern Pennsylvania after the rise in New Jersey’s minimum wage, consistent with the main findings of our earlier study.” They go on to analyze the effects of the 1996 rise in the Federal minimum wage, which raised the minimum wage in Pennsylvania but not New Jersey. They found no indication of employment losses in Pennsylvania relative to New Jersey. Finally, they go on to analyze why Neumark & Wascher get different results, and find that “the differences between the Neumark/Wascher data and both this new & the orignal Card-Kreuger data come from “a small set of restaurants owned by a single franchisee.” Duh!

TAKEHOME: There is good evidence that raising the minimum wage does not affect the number of jobs available in the fast-food industry. There is NO evidence that raising the minimum wage causes unemployment to rise in the sector affected by the wage rise.

A Tale of Two Think-Tanks - <a href="http://www.sourcewatch.org/index.php?title=Think_tanks/"> Check them out here</a> The Employment Policy Foundation (EPF) is a nonprofit think tank, that states its mission as :"to shape the direction and development of U.S. employment policies by providing policymakers, the media and the public with timely, high quality economic analysis and commentary." Federal and state executive branch officials and legislators, corporations, think tanks, universities, media and the public use EPF as a primary source of unbiased, reliable data, research and knowledge on employment and labor issues. In contrast, The Employment Policies Institute See <a href="http://philanthropy.com/free/articles/v14/i14/14002501.htm/">It’s Not the Economic Policy Insitute!</a> is one of several front groups created by Berman & Co., a Washington, DC public affairs firm owned by Rick Berman, who lobbies for the restaurant, hotel, alcoholic beverage and tobacco industries. This EPI, registered as a 501(c)(3) tax-exempt organization, has been widely quoted in news stories regarding minimum wage issues, Only a few of those stories have correctly described it as a "think tank financed by business;" most stories fail to provide any identification that would enable readers to identify the vested interests behind its pronouncements. EPI's mission is to keep the minimum wage low so Berman's clients can continue to pay their workers as little as possible. EPI also owns the internet domain names to <a href="http://www.minimumwage.com/">MinimumWage.com</a> and <a href="http://www.livingwage.com/">LivingWage.com</a>. The latter is a website that attempts to portray the idea of a living wage for workers as some kind of insidious conspiracy. "Living wage activists want nothing less than a national living wage," it warns (as if there is something wrong with paying employees enough that they can afford to eat and pay rent?)