Minimum Wage: Job Loser or Wage Gainer? Latest Research and Debate Liana Fox Columbia University School of Social Work

Outline Who Benefits? Impacts on Workers Impacts on Employment Impacts on Community

History of the Minimum Wage In 1938 Congress enacted the federal minimum wage, originally setting it at 25 cents per hour, as part of the Fair Labor Standards Act (FLSA). Original proposals for the FLSA provided for a commission that would set the minimum wage after a public hearing and consideration of cost-of-living estimates provided by the Bureau of Labor Statistics (BLS).

Who Benefits? Adults (80%) Women (60%) Parents (7.3 million children) Workers in low-income families 46% of affected families rely solely on MW earnings Often stay at MW for extended time

Purpose/Goals of Minimum Wage Part of broad strategy to reduce poverty Reverse trend of declining real wages for workers Redistribution

Impact on Poverty Important part of anti-poverty program Strong evidence for small effect

Debate on employment effect Consensus? Card & Krueger State-based analysis Does it even matter?

Swamped by other factors “We saw no effect at all in the unemployment rate. Unemployment just continued to go down. [The minimum wage increase] was totally swamped by other factors going on in the economy.” -Nobel Laureate Joseph Stiglitz

Weight of the evidence “Many studies have examined this issue, and the weight of the evidence suggests that modest increases in the minimum wage have had very little or no effect on employment.” Economic Report of the President

Change in economic opinion “Elementary economic reasoning suggests that setting a minimum wage above the free- market wage must cause unemployment… Indeed, earlier editions of this book, for example, confidently told students that a higher minimum wage must lead to higher unemployment. But some surprising economic research published in the 1990s cast serious doubt on this conventional wisdom.” -Alan Blinder (2006) p.493

Economist Statement Modest increases in state and federal minimum wages can “significantly improve the lives of low-income workers and their families, without the adverse effects that critics have claimed.” -- Statement signed by 650 economists, including 5 Nobel Prize winners in economics, 6 past presidents of American Economics Association (Economic Policy Institute, 2006)

State-level evidence Higher MW states had faster rates of employment growth in most affected sectors.

Other potential costs/benefits Profits, prices and productivity Efficiency gains Stimulate economy through consumer spending Multiplier effects Budget/effect on taxpayers

Conclusion While findings are not unanimous, the weight of opinion has clearly been moving toward a belief that the minimum wage improves the lives of low-wage workers without adverse consequences.