30 Years of Research Rebut Biden's Minimum-Wage Agenda

New study shows wage hike will kill jobs

Chicago minimum-wage protesters in 2017 / Getty Images
January 26, 2021

Democrats' plan to hike the minimum wage would cost American jobs, a new review of decades of studies finds.

The analysis, published Monday by the National Bureau of Economic Research, combed through academic literature on the minimum wage and determined that nearly 80 percent of studies conducted since 1992 have found that an increased minimum wage leads to a decrease in the level of employment.

The effect, study authors David Neumark of U.C Irvine and Peter Shirley of the West Virginia state legislature find, is most pronounced for teens and young adults, particularly for the less-educated—meaning that these groups are most likely to be pushed out of the labor market by a hike in the minimum wage.

The new study comes as congressional Democrats reintroduce legislation to raise the federal minimum wage to $15 an hour and as President Joe Biden pushes for the same hike as part of his proposed $1.9 trillion COVID-19 stimulus plan. Neumark and Shirley's findings serve as evidence that these pushes could cost American jobs as the unemployment rate remains elevated thanks to the coronavirus recession.

Neumark and Shirley observe that the debate around the minimum wage is highly fraught, with expert economists often reaching different conclusions based on the same data. Surveying recent summaries of the literature, they find that researchers have simultaneously concluded that increasing the minimum wage cuts jobs, that it doesn't cut jobs, and that the evidence is too equivocal to say either way.

In an attempt to cut through this dispute, the pair summarize what they identify as the central findings of some 30 years of papers, stretching back to the pioneering work done by Berkeley economist David Card, one of the first economists to use modern methods to study the effects of the minimum wage on employment and wages.

The results of Neumark and Shirley's survey are not rosy for minimum-wage advocates. They find that some 80 percent of results are negative, with roughly half being both negative and statistically significant. Most of the studies that find large, positive effects of the minimum wage on unemployment are from the early part of the period surveyed, suggesting that they may be using less accurate data or less effective methodology.

The effects are particularly pronounced for teenagers, for whom just one study indicates a significant increase in employment, compared with 18 that find a negative and significant effect. This observation is particularly significant given recent research evidence that finds that minimum-wage increases can lead to an increase in property crime, as young and marginally skilled people are pushed out of the labor market and instead commit crimes to get by.

The new review may prove problematic for Democrats, who this week have begun a push to pass a $15 federal minimum wage into law, with newly installed Senate Budget chairman Bernie Sanders (I., Vt.) leading the charge. That could cost anywhere from 1.5 million to 3.7 million jobs, according to an estimate published by the nonpartisan Congressional Budget Office last year.

Congressional Republicans, meanwhile, have signaled their hostility to the increase and to Biden's stimulus bill more generally. Republican senators attacked the wage hike during hearings for new Secretary of the Treasury Janet Yellen. Yellen told Sen. Tim Scott (R., S.C.) that "the likely impact on jobs is minimal"—not only disagreeing with the new study but also contradicting her own conclusions from 2014.

Published under: Minimum Wage