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In the latest paper on the impacts of minimum wage increases on the labor market opportunities for the targeted populations:

(wait, before I post the findings, you can obviously dismiss them because I have an agenda, and second, I remind you again that even if the findings below showed the opposite, that says little about whether minimum wages are desirable, and third, even if the findings below showed the opposite, the economics of the minimum wage does not ipso facto conclude that unemployment necessarily results. Be a good economist, what do you think it concludes? Simply that there is no free lunch – that mandating wage increases is not costless, and the challenge for both the theorist and empiricist is to identify exactly where these lunches are coming from).

So, here is the latest:

… My baseline estimate is that this period’s full set of minimum wage increases reduced employment among individuals ages 16 to 30 with less than a high school education by 5.6 percentage points. This estimate accounts for 43 percent of the sustained, 13 percentage point decline in this skill group’s employment rate and a 0.49 percentage point decline in employment across the full population ages 16 to 64.

Note that these are declines in the employment rate. If we see these young workers drop out of the labor force, then these effects will NOT show up as increases in the unemployment rate. Further, in a population of apx 200 million in that age category, a 0.49 percentage point decline is is about a decrease of employment of a million people. 

How about among the population 16-30? There seem to be roughly 7 million people (starts at age 18 and ends at 29) in this group. The latest minimum wage increase, according to the paper, reduced employment by 5.6 percentage points here?  This is about 400,000 fewer people employed. Note that this is just from this one particular set of minimum wage hikes and says nothing about the legacy impact on the labor markets of 75 years of minimum wage implementations (i.e. opportunities never created either due to changes in the structure of production to be more capital and/or high-skill labor intensive).

Those impacts seem unusually large to me. Imagine if I proposed a program that went something like this:

“Hi Everyone. Vote for Me. I am going to impose some new laws on businesses. They will be great. They will help some people. However, small businesses are going to be the ones actually paying for these new laws, and in addition, these new laws will result in 400,000 fewer young, low-educated people having jobs. Sound good?”

And of course everyone will agree to vote for me.

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On the other hand, whether you “like” or “dislike” these kinds of results, I would be curious to see more systematic coverage of all of the obstacles to low-skilled and low-education individuals finding work, should they seek it – and just how important these particular price controls are among these obstacles. My sense (and this will have me summarily tossed from whatever tribe I am supposed to be in) is that (1) even though this is a carefully constructed study, it is picking up employment losses due to more than the minimum wage; (2) like all studies in the social sciences I am not trusting of the findings given that we do not see all of the regressions that were run and specifications chosen to find these particular results; and (3) That the impact of other things on labor market opportunities for low-educated people swamp even these large minimum wage effects. My reasoning on (3) is that the wouldn’t be any need or push for minimum wage legislation if low-skilled workers were very productive unless you have an unreasonable view of how many frictions there are in the low-skilled labor market.

 

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