Jeffrey Clemens has an excellent new paper on some of the employment consequences for low-skilled workers of minimum-wage legislation. Here’s the abstract (emphasis added):
I analyze recent federal minimum wage increases using the Current Population Survey. The relevant minimum wage increases were differentially binding across states, generating natural comparison groups. I first estimate a standard difference-in-differences model on samples restricted to relatively low-skilled individuals, as described by their ages and education levels. I also employ a triple-difference framework that utilizes continuous variation in the minimum wage’s bite across skill groups. In both frameworks, estimates are robust to adopting a range of alternative strategies, including matching on the size of states’ housing declines, to account for variation in the Great Recession’s severity across states. My baseline estimate is that this period’s full set of minimum wage increases reduced employment among individuals ages 16 to 30 with less than a high school education by 5.6 percentage points. This estimate accounts for 43 percent of the sustained, 13 percentage point decline in this skill group’s employment rate and a 0.49 percentage point decline in employment across the full population ages 16 to 64.
No doubt other econometricians will counter with different empirical studies that find that raising the minimum wage does not cause job losses for some low-skilled workers.* But whether Clemens’s study is ‘right’ or ‘wrong’ – I find it to be quite compelling – its very existence proves that, contrary to the assertions of some famous economists (who perhaps do not keep up with the literature), there is indeed evidence that raising the minimum wage costs jobs, even when the starting point is as low as it is in modern America.
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* Given the size, complexity, and dynamism of the U.S. economy, and given the various margins – many of which are practically unobservable (and, even when observable, impossible to quantify objectively) – along which employers and workers can adjust to hikes in minimum wages, this debate will never be settled purely through empirical studies.
