Blinder Misrepresents Minimum Wage Studies

Most studies show that minimum wages reduce low-skilled employment.

Letter to The WSJ. 

"Prof. Alan Blinder is entitled to the opinion that the federal minimum wage of $7.25 is too low (“Washington Can Give America a Raise,” op-ed, Aug. 21). But he is not entitled to his own facts.

Mr. Blinder claims that, beginning with David Card and Alan Krueger’s study of the fast-food industry, economic research has “demonstrated that modest minimum-wage increases result in few or no job losses.” Two problems. First, the Card and Krueger result, which was actually that the higher minimum wage led to large employment gains, has been debunked as dependent on a flawed survey that collected misleading data. Second, most studies show that minimum wages reduce low-skilled employment—the opposite of what Ms. Blinder claims.

Prof. Blinder also falls into the trap of equating a higher minimum wage, which of course reduces wage inequality among those still working, with a policy that helps equalize incomes. Decades of research have shown that higher minimum wages do little to raise incomes for poor families. Aside from the job loss, minimum wages don’t target benefits at poor families effectively because many minimum wage workers are teenagers in higher-income families and many poor and low-income families have no workers. As a result, minimum wages don’t reduce poverty.

We expect badly motivated policies to surface during the “silly season” of a presidential election—witness the proposal to eliminate taxes on tips endorsed by both candidates. But we should expect distinguished scholars to enlighten us, rather than to mischaracterize some research, and ignore other research, in support of the opinions behind which they throw their weight.

Prof. David Neumark

University of California, Irvine

In defense of a higher minimum wage, Mr. Blinder cites a controversial 1994 study that suggested a wage mandate could create jobs. The authors, economists David Card and the late Alan Krueger, reached that conclusion after a phone survey of employers in New Jersey (where the minimum wage went up) and Pennsylvania (where it didn’t.)

But subsequent analysis debunked this finding. The faulty methodology failed to properly define full- and part-time employees, among other problems. A later analysis of comprehensive payroll data, published in the same academic journal, conclusively showed a 4.6% decrease in New Jersey’s employment (relative to Pennsylvania’s) following the wage hike.

The economic consensus on minimum-wage consequences has grown stronger in recent years, with 80% of studies in the past three decades finding an “overwhelmingly negative” impact. The nonpartisan Congressional Budget Office concluded that a $15 wage would still cost more than a million jobs. So much for Mr. Blinder’s “economic good.”

Michael Saltsman

Employment Policies Institute

Arlington, Va."