A Groundbreaking New Report Upends Conventional Wisdom About the Minimum Wage

A table from the groundbreaking NELP report.

A table from the groundbreaking NELP report.

You’ve heard opponents argue again and again that raising the minimum wage will kill jobs. (And you’ve seen us refute their claims at every turn.) If you increase labor costs for businesses, they claim, employers will have to either raise costs or lay off employees. They discuss minimum-wage increases in such simple language that it’s hard to argue with them: wages go up, employment goes down. A child could understand that, right?

Unfortunately, simplicity doesn’t always equal truth. For most of the history of humanity, we believed through our uninformed observations that the sun circled the earth, and that misconception colored our understanding of the way the universe works. These charges that raising the minimum wage will kill jobs are just as untrue as the belief that the earth is the center of the universe.

Luckily, we now have proof that raising the minimum wage doesn’t kill jobs, in the form of a new report from the National Employment Law Project. Titled “Raise Wages, Kill Jobs? Seven Decades of Historical Data Find No Correlation Between Minimum Wage Increases and Employment Levels,” authors Paul K. Sonn and Yannet M. Lathrop, using data collected with help from T. William Lester, PhD., lay out every federal minimum-wage increase in America since 1938, making “simple before-and-after comparisons of change 12 months after each minimum-wage increase.” This seems basic enough, and it’s fairly remarkable that nobody has ever thought to do it before.

So what did they find using these methods?  Out of 22 changes in the federal minimum wage since 1938, “in the substantial majority of instances (68 percent) overall employment increased after a federal minimum-wage increase.” This means that one year after the national minimum wage went up, employment was up 15 out of 22 times. Of the decreases remaining, the vast majority occurred just after or during recessions, when employment always decreases, no matter what the minimum wage is.

And in those industries most affected by minimum wage hikes—restaurants, hotels and other leisure and hospitality fields—employment went up over eighty percent of the time, while retail employment increased nearly three-quarters of the time. This is significant because it is precisely these service-sector jobs that minimum-wage opponents generally argue they are trying to save by keeping wages low. The fact that these industries, on average, do better than normal when the minimum wage goes up is a game-changing discovery. Ultimately, Sonn and Lathrop write, the report provides “simple confirmation that opponents’ perennial predictions of job losses when minimum-wage increases are proposed are rooted in ideology, not evidence.”

The case for raising the minimum wage has always been that it transforms low-wage workers into consumers, and the money those workers earn is immediately spent in the local economy. When people who work in restaurants can actually afford to eat in restaurants, everybody does better. Until now, both sides of the minimum wage “debate” have had their theories. This report finally proves that the more inclusive theory—the one that favors raising the minimum wage in order to empower more Americans as consumers—is the correct one. We’ll always be plagued by equivocators and people who just straight up do not want to pay their workers a living wage. But this new paper is a breakthrough, because it puts a stake through the heart of the most basic claims of minimum-wage opponents.

The next time someone tries to tell you that raising the minimum wage will cost jobs, you can do more than just spout theories at each other. You can show this study to minimum-wage doubters and demonstrate exactly why raising the minimum wage is good for everyone, from business owners to workers. Finally, after years of argument and the endless shouting of bumper-sticker slogans, we have proof: as surely as the earth orbits the sun, raising the minimum wage strengthens, not weakens, the local economy.

Paul Constant

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