One of the main arguments that opponents use against raising the minimum wage (by any amount, let alone a jump to $15) is that it would inevitably reduce employment for low-skill workers, particularly teenagers. Were these arguments put forth by advocates for the young and/or working poor, I might take them more seriously. But coming as they do from corporate-funded propaganda machines like Douglas Holtz-Eakin's American Action Network (which spent $750,000 in Washington State in 2010 running attack ads against Senator Patty Murray), I find their defense of low-wage jobs on behalf of low-skill workers to be rather disingenuous.
But is it true? Holtz-Eakin and other conservatives love to cite a 2012 study by economists Joseph Sabia, Richard Burkhauser, and Benjamin Hansen (pdf) that found that a 31 percent New York State minimum wage hike from $5.15 to $6.75 between 2004 and 2006 reduced employment for those at the bottom of the workforce by over 20 percent compared to neighboring states. Indeed, whenever you hear a minimum wage critic categorize this assertion as an undisputed fact, they are almost always referring to the Sabia, Burkhauser, Hansen (SBH) study.
But a new paper from University of Delaware economist Saul Hoffman (pdf) pretty much tears the SBH study a new one. It's not the methodology that throws the much-cited SBH study off, finds Hoffman, but rather the data. SBH reached their conclusion by analyzing a subset of the federal government's monthly Consumer Population Survey (CPS), resulting in a very small sample size of young, low-skill workers. But when the full CPS was used—the "gold standard" of US employment data—the negative impact on employment disappears.
My re-analysis of the SBH natural experiment yields results that are substantially different than theirs. I find no evidence whatsoever of a negative employment impact for young, less-educated workers in NY following the minimum wage increase. The difference in results reflects the different data sources used. SBH used the CPS-MORG, which are a one-quarter subsample of the full CPS, while I used the full CPS files. In this case, the MORG files yield incorrect estimates of the employment rate changes in NY and in the control states, substantially overstating the apparent impact of the minimum wage change. When the two data sources conflict, there can be no doubt that the full CPS, which is the source of official employment data, is the appropriate one to rely on.
But Hoffman goes further. He also applies the same analysis to CPS data for four other states that raised their minimum wage during the same period (if less steeply than NY), finding a small positive employment impact compared to neighboring states. Hoffman concludes:
My findings of employment effects that are either negligible, as in the case of New York, or positive, as in the case of DC, FL, IL, and NJ, are largely consistent with the newer round of minimum wage employment estimates.
Hoffman cautions that his findings merely support the idea that a modest hike in the minimum wage over two years "may not be problematic in terms of employment." NY's $5.15 to $6.75 minimum wage hike represented a 31 percent increase; the other states he analyzed raised their minimum wage by only 10 to 20 percent. But a $15 minimum wage would represent a 61 percent increase over Seattle's current $9.32 an hour minimum wage. There is little precedent for such a large increase, and as Hoffman notes, the natural experiments he analyzes "are not informative about what the employment consequences might be for much larger increases." But, then, neither is the SBH study that opponents so often cite to argue that a $15 minimum wage would be a disaster.
The point is, while it might seem reasonable to speculate that a large minimum wage hike could negatively impact employment—particularly for young, low-skill workers—there is no data to back this argument up! So there.