Posted in: Politics

Study: Higher Minimum Wage States Have More Jobs

Study--Higher-Minimum-Wage-States-Have-More-Jobs

A study released this week by the Department of Labor could help further the notion that a higher minimum wage is not so bad for the economy after all.

According to a report by the Associated Press, the study by the Labor Department said states who enacted a higher minimum wage at the beginning of this year were seeing the number of jobs available to its citizens increasing at a higher rate than in states that did not enact higher minimum wage laws.

Per the AP:

“Economists who support a higher minimum say the figures are encouraging, though they acknowledge they don’t establish a cause and effect. There are many possible reasons hiring might accelerate in a particular state.

“‘It raises serious questions about the claims that a raise in the minimum wage is a jobs disaster,’ said John Schmitt, a senior economist at the liberal Center for Economic and Policy Research. The job data ‘isn’t definitive,’ he added, but is ‘probably a reasonable first cut at what’s going on.’

“Just last week, Obama cited the better performance by the 13 states in support of his proposal for boosting the minimum wage nationwide.

“‘When… you raise the minimum wage, you give a bigger chance to folks who are climbing the ladder, working hard…. And the whole economy does better, including businesses,’ Obama said in Denver.”

While conservative politicians and a string of economists have long fought minimum wage increases by arguing it would slow or stall the economy and result in an increase for the cost of goods and services, The Economist reports that data is showing the opposite impact from a higher minimum wage, specifically pointing to Britain’s minimum wage increase near the turn of the century:

“The economic consequences are hard to predict. Economists historically frowned on minimum wages as distortionary price fixing that reduced demand for workers affected by the wage. But that assumption has come under fire from a growing body of research. The introduction of Britain’s minimum wage in 1999 had no notable impact on jobs, for example. In America, the White House approvingly cites research by Arindrajit Dube, William Lester and Michael Reich that compared counties where the minimum wage rate rose to neighbouring counties in states where it didn’t and found no negative effect on employment. The theory is that higher wages reduce costly turnover, reducing the incentive to lay workers off.

“Some minimum-wage proponents go even further, arguing that a higher minimum boosts jobs by shifting income towards people who consume more of what they earn. The EPI, for example, last year claimed a minimum wage of $9.80 per hour would create 100,000 jobs.”

So what do you think? Is a higher minimum wage good for the economy or will it hurt? Tell us in the comments section below.

[Image via Flickr Creative Commons]

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One Response to “Study: Higher Minimum Wage States Have More Jobs”

  1. Lance Brofman

    Increasing the minimum wage would in many cases be just transfer money from those who eat at McDonalds to those who work at McDonalds and similar establishments. At worst it is a distraction from the main cause of both inequality and the low level of economic growth which is the vast shift in tax burden away from to rich and onto everyone else. How could you not get a vast increase in inequality when you make the tax rate on the types of incomes that the wealthy receive such as dividends, capital gains and corporate profits much less than the tax rates on wages and make 99.9% of all estates exempt from the inheritance tax?

    “..It is not just a coincidence that tax cuts for the rich have preceded both the 1929 and 2007 depressions. …. ….Equally unhelpful in terms of addressing the income and wealth inequality which results in the overinvestment cycle that caused the depression are various non-tax factors. Issues such a minimum wage laws, unwed mothers, globalization, free trade, unionization, problems with our education system and infrastructure can increase the income and wealth inequality. However, these are extremely minor when compared to the shift of the tax burden from the rich to the middle class. It is the compounding effect of shift away from taxes on capital income such as dividends each year as the rich get proverbially richer which is the prime generator of inequality…”
    http://seekingalpha.com/article/1543642