New Study: Large Minimum Wage Hikes Especially Disadvantage Younger, Less Educated Workers

Taking advantage of variations in state minimum wage hikes, researchers find strong effects for bigger hikes, not much for smaller ones.

Younger, less-well-educated workers have been especially harmed by recent state-level minimum wage hikes, according to a study issued today by the National Bureau of Economic Research. The paper was written by economists Jeffrey Clemens of the University of California, San Diego, and Michael R. Strain of the American Enterprise Institute.

The supply-demand analysis at the heart of economics suggests that raising the price of labor would lead to lower demand for it, other things being equal. The past decade has provided particularly useful empirical data against which to test this notion.

“After the Great Recession [of the late 2000s], there was a pause in both state and federal efforts to increase minimum wages,” the authors note. “This pause created a baseline (or ‘pre-period’) for empirical purposes. It was followed by considerable divergence in states’ minimum wage policies. A number of states legislated and began to enact minimum wage changes that varied substantially in their magnitude. From January 2011 to January 2019, for example, Washington, D.C., California, and New York had increased their minimum wages by 61, 50, and 53 percent, respectively. Wage floors rose more moderately in an additional 24 states and were unchanged in the remainder.” The past decade thus gave researchers a chance to compare the employment effects of “moderate minimum wage changes and historically large minimum wage changes” across U.S. states.

They found that “over the short and medium run, relatively large increases in minimum wages have reduced employment rates among individuals with low levels of experience and education by just over 2.5 percentage points.” By contrast, smaller increases, or ones resulting from indexing inflation to wages, have effects that are “variable and centered on zero.” – READ MORE