The Critics Who Cried Wolf: Decades of Misleading Claims Around Increases in Federal Minimum Wage

Employment Usually Grew Following Increases in Federal Minimum Wage

Washington, D.C. – A new look at U.S. employment data from 1938 through 2009 shows that employment levels usually increased after the federal minimum wage went up, contrary to opponents’ claims that the sky would fall. The new brief, released this week by the National Employment Law Project, provides a straight-forward fact-check of opponents’ perennial claims that raising the minimum wage costs jobs. It does so by looking at simple economic indicators such as total private sector employment, and employment in major low-wage industries – indicators that correspond to opponents’ predictions about how jobs and the economy will suffer when wages go up.

The NELP brief examined each of the 22 times Congress raised the federal minimum wage between 1938 and 2009, and looked at the indicators one year later. It shows that, in the substantial majority of cases, employment actually improved after Congress raised the wage.

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“The fact that jobs usually go up, not down, after a minimum wage increase reveals how predictions that raises will cost jobs are rooted in ideology, not evidence,” said Paul Sonn, general counsel at the National Employment Law Project, one of the brief’s authors.

The brief shows that:

  • 15 out of 22 times – 68% of the time – an increase in the federal minimum wage was followed a year later by an increase – not a decrease – in total private sector employment.
  • For the retail and hospitality sectors – the two largest low-wage sectors – it was even higher: jobs went up 73% and 82% of the time, respectively.
  • And the handful of times that employment did not go up all occurred during recessions or near-recessions – indicating that the business cycle, not the minimum wage, was likely the factor driving the rare dips.

Other indicators were also positive:

  • For example, small business owners’ income also grew in the year after 3 out of 4 federal minimum wage increases since 1988.
  • And the number of restaurants opening has increased every single year after a federal wage increase since data became available in 1988.

NELP’s findings are in line with the bulk of modern minimum wage research indicating little adverse effect on jobs when the minimum wage goes up. As Goldman Sachs analysts summarized recently, “the economic literature has typically found no effect on employment [of recent U.S. minimum wage increases].”[i] This is illustrated by meta-studies that survey and pool the results from scores of minimum wage studies – and show that the overwhelming majority find little to no impact on employment when the minimum wage goes up.

The brief supplements that body of academic research by directly evaluating opponents’ rhetorical assertions about the impact of higher wages.

The minimum wage has been opposed by many business groups and conservative legislators since its inception – typically predicting economic catastrophe if wages are raised. As early as 1937, employer lobbyists warned, “We…know what has always happened when governments have tried to superintend the industry of private persons. The final result has always been distress, misery and despair.” And just this year, Senator Ted Cruz warned, I think the minimum wage systematically hurts the most vulnerable…I think it’s a bad policy.” 

DOWNLOAD THE BRIEF

Raise Wages, Kill Jobs? Seven Decades of Historical Data Find No Correlation Between Minimum Wage Increases and Employment Levels

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Endnotes

[i] Daan Struyven & Alec Phillips, Goldman Sachs US Daily: Minimum Wage Hikes and Wage Growth, April 12, 2016.

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