JLF head John Hood’s column today is on the minimum wage, and the empirical evidence that raising the minimum wage costs jobs. A highlight:
To suggest that artificially raising the price of something isn’t likely to reduce purchases of it is like suggesting that sticking a pin in a balloon isn’t likely to pop it. Sure, you can devise a gag balloon or magic trick that performs differently, that allows you to poke at it with reckless abandon and still keep the balloon intact. To cite such an exception in an attempt to disprove the basic laws of physics, however, would convince no one.
Similarly, the existence of a few studies suggesting little to no effect of minimum wages does not constitute proof that basic economic principles are absent from the labor market. Two of the nation’s most-respected labor economists, the University of California-Irvine’s David Newmark and the Federal Reserve’s William Wascher, have spent years pointing this out in a series of academic studies and reviews. They’ve demonstrated that the outlying studies on the minimum wage are often methodologically flawed or based on errant data. They’ve also demonstrated that the vast majority of rigorous studies find a negative effect of minimum wages on employment, particularly among the lowest-skilled workers.
