A new study on the effects of an increased minimum wage on employment shows that increased wages in six cities had no discernible effect on employment. But while this is great news, the prospect of employment losses should not be how we evaluate the worthiness of raising the minimum wage.
But first, the positive news: Researchers from the Center on Wage and Employment Dynamics at the University of California, Berkeley, analyzed policies in six cities that had raised their minimum wages—Chicago, Washington, D.C., Oakland, San Francisco, San Jose, and Seattle. At the end of 2016 (the end of the study period), minimum wages in these cities ranged from $10 to $13 per hour.
The Berkeley researchers focused on the restaurant industry, and looked at earnings across the industry in these cities and compared them to similar metropolitan areas. They found that a 10 percent rise in the minimum wage increased earnings between 1.3 and 2.5 percent—about an extra $16 to $32 each week. And there was no significant effect on employment.
According to Carl Nadler, one of the study's co-authors, these policies “are working just as intended.”
Indeed, recent research has generally indicated that effects on employment would be small.
However, one study last year gained significant news coverage because it claimed higher minimum wages were decreasing job opportunities in Seattle. Conservatives took this evidence and used it to claim that living wages are unsustainable and would actually harm low-wage workers.
But let's say that Seattle study, which suffered from methodological issues according to the Economic Policy Institute, was correct. Even if some people did lose their jobs, which would be terrible, isn’t it also terrible for millions of workers to be forced to live—and in many cases, raise a family—on $7.25 an hour?
“Focusing only on job loss ignores one of the main effects of minimum-wage increases: rising hourly and annual earnings for potentially tens of millions of low-wage workers—many more of whom will gain than lose,” economists David Cooper, Lawrence Mishel, and Ben Zipperer of EPI wrote in an April report.
Here's an idea: Raise the wage, and if major job losses come (and they likely won't), ensure there are strong unemployment insurance and job creation programs to help those few workers who would be affected.
