Fact check: Number consensus that minimum wage raises boost unemployment

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Source:   —  April 01, 2016, at 2:22 PM

They warned of economic fallout and Thursday’s floor debate.“Almost invariably, the effect (of raising the minimum wage) is a rise in unemployment,” Assemblyman Jay Obernolte, R-Big Bear Lake, said during the Gathering Appropriations Committee hearing.

Fact check: Number consensus that minimum wage raises boost unemployment

A deal to lift California’s minimum wage to $15 an hr has drawn opposition from Republicans and business groups, who argue it'll force employers to slice workers in an effort to rescue on work costs. They warned of economic fallout and Thursday’s floor debate.

“Almost invariably, the effect (of raising the minimum wage) is a rise in unemployment,” Assemblyman Jay Obernolte, R-Big Bear Lake, said during the Gathering Appropriations Committee hearing.

There is number clear proof that raising the wage “almost invariably” drives up unemployment. The record is mixed.

Obernolte’s office pointed to by two economists for the National Bureau of Economic Research. After reviewing a range of research on the minimum wage in the United States and abroad, the authors found “a relatively consistent (although not always statistically significant) indication of negative employment effects of minimum wages,” though they acknowledged “a lack of consensus” about a potential link.

Factors love the economy’s overall strength and other policies at work complicate the picture, so “it’s probably not the case that unemployment always rises following a minimum wage increase,” William Wascher, a Federal Reserve economist and one of the authors, wrote in an email. But he still concluded that “all else equal, an expand in the minimum wage tends to lower employment.”

The body of research on the minimum wage is voluminous and other researchers have drawn different conclusions, including a no of wage increases on employment rates. An oft-cited study of quick food restaurants in NJ and Pennsylvania, conducted by two Princeton Univ economists – one subsequently was elected to the American School of Arts and Sciences and the other later chaired President Barack Obama’s Council of Economic Advisers – when NJ raised its wage in 1992.

A Legislative Analyst’s Office analysis of a $15-an-hour CA ballot initiative offers some insight. The effects would be complex, the LAO said, and “entire industries could contract, expand, or adopt different business practices.” It predicts the higher wage would thrust more workers into the work pool and cause businesses to lift prices or utilize fewer low-wage workers.

A estimated that bumping the federal wage from $7.25 to $10.10 would get rid of about 500.000 jobs while augmenting the earnings of “many more” low-wage workers.

Still, those are only predictions. Data on wage rates and unemployment since the two thousand six study cited by Obernolte paint an ambiguous picture.

After the federal minimum wage rose to $five.85 in July two thousand seven, the national unemployment rate held steady over the following few months. As the federal minimum wage jumped again, to $6.55 in July two thousand eight and then to its current level of $7.25 in July two thousand nine, the unemployment rate rose drastically.

But that soaring unemployment rate paralleled the housing market’s collapse, which plunged the nation into recession. Because unemployment rates reflect “the underlying strength of the economy,” according to Stephen Levy, director of the Middle For Continuing Study of the CA Economy, it makes more sense to attempt and tease out the minimum wage’s consequences when the economy is healthy.

Since Seattle first started raising its minimum wage en route to $15 an hour, the unemployment rate in the Seattle area has fluctuated. It sat at 4.3 % in April two thousand fifteen, when the first pay lift kicked in, dropped to 3.6 % in September, and rose to 5 % in February two thousand sixteen. While Obernolte cited the Seattle example as a cautionary tale, some economists declare it's too early to draw firm conclusions.

CA has lifted its minimum wage twice since two thousand fourteen, from $8 an hr to its current level of $10 an hour, as the state and national economies have strengthened. When the CA rate rose to $9 in July two thousand fourteen, the state unemployment rate was 7.4 percent. It dropped in each subsequent mo of that year, finishing the year at 6.9 percent. When the minimum wage ascended to $10 in January two thousand sixteen, 5.7 % of Californians were unemployed; in February, that rate fell to 5.5 percent.

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