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Look at Facts on Effects Of Minimum Wage Raise

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We’re less than one month into 2013, but advocates in favor of raising the minimum wage around New Mexico are already on the move.

Albuquerque’s wage spiked to $8.50 on Jan. 1, and now Bernalillo County wants to do the same. Both are following in the footsteps of Santa Fe, where the minimum wage just hit $10.51.

Proponents of higher minimum wages — in New Mexico and elsewhere — think they have the facts on their side. Specifically, they look to two recent studies from an organized labor-aligned research center at UC-Berkeley, both of which claim that increasing the minimum wage will have no negative effect on entry-level job opportunities.

But not so fast: A new scholarly report from UC-Irvine minimum wage expert David Neumark, co-authored with UC-Irvine Ph.D student J.M. Ian Salas, finds that the Berkeley studies relied on a flawed model that led to erroneous conclusions.

In other words, the studies that wage hike advocates are relying on are wrong.

This shouldn’t come as a surprise. The published research on minimum wages already casts doubt on the Berkeley studies.

Eighty-five percent of the most credible studies from the last two decades show job loss associated with a wage hike, according to a review of the literature co-authored by Neumark and Federal Reserve Board economist William Wascher.

Still, this hasn’t kept a small band of dissenting economists — based at UC-Berkeley, UMass-Amherst, and the University of North Carolina — from mounting a challenge to the consensus.

Economists traditionally detect job losses related to the minimum wage by comparing employment in a state that raised the minimum wage against employment in states that didn’t. The authors of the dissenting reports, however, argue that this approach wrongly blamed the minimum wage for employment declines, when the real culprit was some other employment downturn that happened to coincide with the wage hike.

To fix this “problem,” the Berkeley authors restricted their study only to state border counties or states in the same Census Division. Unfortunately, they never provided any direct evidence for why this was the superior approach — they simply implied that their way was better.

Enter Neumark and Salas.

Their report systematically proves that the approach in the Berkeley papers is wholly unsupported by the data. In most cases, the nearby states and counties used in these studies are very poor comparison groups. (To wit: Just because Connecticut and Maine are located near each other doesn’t mean they’re a good match.) When the analysis is not restricted to these inappropriate control groups, the data clearly show that wage hikes do cause job loss — consistent with the long-standing economic consensus.

This new report is a major drawback for wage hike advocates, many of whom have made these new studies a central part of their push for a higher minimum wage. But the data doesn’t lie — such hikes only hurt the people they’re intended to help.

This is particularly noteworthy given the country’s ongoing economic troubles.

The U.S. economy hasn’t been particularly kind to less-skilled jobseekers in recent years. Teen unemployment has been above 20 percent for four painful years — and in New Mexico, the teen unemployment rate is nearly 23 percent.

Fewer job opportunities is the last thing these teens need, especially with reports now circulating that Albuquerque’s minimum-wage hike has already caused cutbacks at local restaurants.

As politicians and citizens across Bernalillo County start to debate whether to raise their wage, they should remember to look at the facts. Choosing ideology over empirical fact may be politically expedient, but for the low-income and entry-level workers who stand to lose job opportunities if the minimum wage goes up, it’s a simple matter of right and wrong.

The Employment Policies Institute is a non-profit research organization dedicated to studying public policy issues surrounding employment growth. EPI sponsors nonpartisan research which is conducted by independent economists at major universities around the country.

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