By Michael Saltsman
We’re less than one month into 2013, but Gov. Andrew M. Cuomo and like-minded advocacy groups who want to raise New York’s minimum wage aren’t wasting any time. The governor has called for an $8.75 minimum, and one union-affiliated group in Manhattan wants to raise it as high as $15.
They claim the facts are on their side, too. Two recent studies from an organized labor-aligned research center at UC-Berkeley claim that increasing the minimum wage will not have a negative effect on entry-level job opportunities. Legislators and activists are waving the studies as proof-positive that their policy makes sense.
But not so fast: A new scholarly report from UC-Irvine minimum wage expert David Neumark, co-authored with UC-Irvine doctoral student J.M. Ian Salas, finds that the Berkeley studies relied on a flawed model that led to erroneous conclusions.
Economists traditionally detect job losses related to the minimum wage by comparing employment in a state that raised the minimum wage against employment in states that didn’t. The authors of the Berkeley reports, however, argue that this approach wrongly blamed the minimum wage for employment declines, when the real culprit was some other employment downturn.
To fix this “problem,” the Berkeley authors restricted their study to state border counties or states in the same census division. Unfortunately, they never provided any direct evidence for why this was the superior approach; they simply assumed that their way was better.
Enter Neumark and Salas. Their report systematically proves that the approach in the Berkeley papers is wholly unsupported by the data. In most cases, the nearby states and counties used in these studies are very poor comparison groups. (To wit: Just because Connecticut and Maine are located near each other doesn’t mean they’re a good match.) When the analysis is not restricted to these inappropriate control groups, the data clearly show that wage hikes do cause job loss consistent with the long-standing economic consensus.
This is particularly noteworthy given the country’s ongoing economic troubles. The U.S. economy hasn’t been particularly kind to less-skilled job seekers in recent years. Teen unemployment has been above 20 percent for four painful years – and in New York, the teen unemployment rate is over 25 percent. Fewer job opportunities is the last thing these teens need.
As New York’s lawmakers start to debate Cuomo’s minimum wage proposal, they should remember to look at the facts. Choosing ideology over empirical fact may be politically expedient, but for the low-income and entry-level workers who stand to lose job opportunities if the minimum wage goes up, it’s a simple matter of right and wrong.
Michael Saltsman is the research director at the Employment Policies Institute.