The belief in the $15 minimum wage to defeat poverty borders on the religious. Empirical evidence casts doubt that the benefit will be so smooth and so unequivocal.
“I can understand why some people look at the evidence and disagree with me. What I can’t understand is the high level of certainty that some proponents have,” Adam Ozimek wrote for Economy.
For small minimum wage increases spread out over time, studies have found negligible changes in employment levels. For the dramatic change that a $15 minimum wage will bring, however, the effects are unprecedented. In Cleveland, for example, unions want an immediate 85 percent increase, which would be a shock to the local economy.
Businesses and the economy can be resilient and absorb costs by raising prices, cutting services, or becoming more productive. The aggregate effect of artificial cost increases, though, can muck up the resiliency of employers.
Ozimek cited a 2012 study by Yusuf Soner Baskaya and Yona Rubinstein that analyzed the minimum wage’s effect on teenagers, finding that “minimum wage hikes have a large and statistically significant effect on teenage employment.” Another by Jeffrey Clemens and Michael Wither in 2014 found that “the 2007-2009 federal minimum wage hike significantly reduced employment” by tracking specific individuals over time.
He pointed to others that discuss the negative effect of the minimum wage on employment growth rates and negative long-run effects that encourage businesses to transition into less labor-intensive practices.
Those studies analyze comparatively small wage increases in the United States. Partially due to the small changes, the real-world effects of the minimum wage remains contested, but even liberal economists call a $15 hike a “gamble.”
“There’s good reason to think that large minimum wage increases could cause a lot more job losses than small ones,” Timothy B. Lee wrote.
Liberal economic writers recognize the risk from hiking the minimum wage based on ideology. The Bernie Sanders perspective that “It is not a radical idea to say that if somebody works 40 hours a week, that person should not be living in poverty” ignores something crucial: economic reality doesn’t care about morality. Blindly pursuing a moral crusade to benefit others could make them worse off. Caution, restraint, and prudence are necessary to ensure the minimum wage isn’t harming the very people it’s meant to help. Unfortunately, that approach has been absent in the debate.