Job Loss Predictions Over Rising Minimum Wages Haven't Come True
Illustration: Sarah Grillo/Axios
Eighteen states rang in 2019 with minimum wage increases — some that will ultimately rise as high as $15 an hour — and so far, opponents' dire predictions of job losses have not come true.
What it means: The data paint a clear picture: Higher minimum wage requirements haven't reduced hiring in low-wage industries or overall.
State of play: Opponents have long argued that raising the minimum wage will cause workers to lose their jobs and prompt fast food chains (and other stores) to raise prices.
But job losses and price hikes haven't been pronounced in the aftermath of a recent wave of city and state wage-boost laws.
- And more economists are arguing that the link between minimum wage hikes and job losses was more hype than science.
What we're hearing: "The minimum wage increase is not showing the detrimental effects people once would’ve predicted," Diane Swonk, chief economist at international accounting firm Grant Thornton, tells Axios.
- "A lot of what we’re seeing in politics is old economic ideology, not what economics is telling us today."
The doom-and-gloom that opponents have predicted, "are part of the political policy debate," Jeffrey Clemens, an economics professor at UC San Diego, tells Axios.
- His research for the conservative American Enterprise Institute is often quoted in arguments against minimum wage increases.
- But Clemens told Axios: "People will tend to make the most extreme argument that suits their policy preferences, and it’s not surprising if that ends up being out of whack with the way things unfold on the ground."
Where it stands: Cities and states around the country are taking action as the federal minimum wage — $7.25 an hour — "has remained unchanged for the longest stretch of time since its 1938 inception under the Fair Labor Standards Act," according to a recent paper by the New York Fed.
- Cities like New York, Seattle, Chicago and San Francisco have raised local minimum wages, and individual companies have done so as well: Amazon set its minimum at $15 an hour last year.
As of July: "14 states plus the District of Columbia—home to 35% of Americans—have minimum wages above $10 per hour, as do numerous localities scattered across other states," according to the N.Y. Fed.
- Laws in New York, California, Connecticut, Illinois, Maryland, Massachusetts, and New Jersey will eventually increase minimum wages to $15 per hour.
Axios used Bureau of Labor Statistics data to compare job growth rates in four states with low minimum wages vs. eight states with high minimum wages:
- Since 2016, when California became the first state to pass the $15 minimum wage law, all 12 states have seen growth in restaurant, bar and hotel jobs.
- Three of the four states with job growth higher than the U.S. median have passed laws that will raise the state minimum wage to at least $13.50.
- Three of the five states with the slowest job growth rates did not have a state minimum wage above the federal minimum of $7.25 an hour.
- An outlier was Massachusetts, which had the slowest job growth in the sector and currently has the highest state minimum wage: $12 an hour.
The big picture: A number of peer-reviewed academic studies have found little to no impact on hiring as states and municipalities have raised the minimum wage.
- Rather, such increases are likely to have increased hiring in the strong U.S. economy, Bill Spriggs, chief economist at labor union AFL-CIO, tells Axios.
Yes, but: There could still be negative long-term effects, such as businesses choosing to locate in states with lower minimum wage requirements, according to the N.Y. Fed's study.
- "The danger is extrapolating too far and saying, 'We should raise wages to $30 an hour,'" Swonk says. "The current minimum wage increases were successful because they were regionally based, and not national or one-size-fits-all."
The bottom line: Opposition to higher minimum wage laws is increasingly based in ideology and orthodoxy rather than real-world evidence, economists say.