Tuesday, January 3, 2017

The Trump administration should show local officials the research proving that minimum wages cost jobs

See The ‘Fight for $15’: Coming to a City Hall Near You.
"Take Los Angeles, where a measure signed in 2015 by Mayor Eric Garcetti will take the city’s minimum wage to $15 by 2020. Two years ago when the mayor began pushing his original proposal of $13.25, one of his deputies sent an email to Ken Jacobs, a sympathetic researcher at the University of California-Berkeley. “We need to demonstrate clearly how this will help labor and the economy in general,” the mayor’s office wrote. (My organization, the Employment Policies Institute, obtained these emails via a public-records request.) The Berkeley team responded by writing a favorable report predicting that price increases would be “negligible” and effects on employment were “not likely to be significant.”

Yet there is much evidence to the contrary. Start with the first two cities to implement minimum wages, which were studied by Aaron Yelowitz of the University of Kentucky, with research support from my organization. In a 2005 paper, Mr. Yelowitz wrote that after the Santa Fe wage bump, the likelihood of unemployment among less-educated workers jumped by more than eight percentage points. A 2012 study by Mr. Yelowitz of San Francisco showed that each $1 increase in the city’s compensation floor increased the likelihood of unemployment among younger workers by 4.5 percentage points. In other words, the increased minimum wage had precisely the result that Econ 101 would predict."

"Having run a food-service company, Mr. Puzder understands, better than most, the effect of a mandated labor cost. In an interview with Hugh Hewitt this past April, he pointed to a summary, published by the Federal Reserve Bank of San Francisco, of the best minimum-wage research. That report showed clear negative effects on employment: for instance, a drop of 1%-2% among workers ages 16 to 19 for each 10% rise in the minimum wage."

"Critics may complain that these reports have their own biases, but the methodology used by the Congressional Budget Office was hardly one-sided. Although its economists estimated that raising the federal minimum to $10.10 would cost about a half-million jobs, they also said such a move would lift nearly one million people out of poverty."

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