Just the Stories ... Debating the Commonwealth Foundation on Minimum Wage

"Just the Facts" is a catchphrase the Keystone Research Center and other progressive economic think tanks use to capture our commitment to grounding advocacy for progressive values and policies in solid data and research.

On the PCN Call-in Program this week, I squared off against Commonwealth Foundation President Matt Brouillette on the issue of the minimum wage. As I said on the air (about nine minutes in), I was struck by Matt's disregard of any real data or research, especially on the critical question of the impact of a minimum wage increase on jobs.

Matt kept repeating the same overly simple story of a small business where a higher minimum wage changes nothing except hourly labor costs, leading some owners to lay off workers or reduce hours (while others accept lower profits or raise prices).

In the real world, lots of things change when the minimum wage goes up. Maybe a small business has gone months or longer without filling several entry-level vacancies paying minimum wage. After an increase, suddenly the business can fill more of those positions because, after all, the higher minimum wage makes it easier to fill vacancies. Real-world result: more jobs after the wage increase. Lower workforce turnover may also translate into higher productivity from more experienced workers so that labor costs do not increase.

There are also impacts on local economies. Maybe workers in Mechanicsburg (where I live) will use their wages increase to get their muffler repaired at Clay's Service Station, make a long-delayed trip to Field's Family Dentistry for a filling, or take their family to the Camp Hill Cinema Center once a month for a movie.

To the extent that a minimum-wage increase reduces job vacancies and drives up purchasing power, it increases jobs.

With competing "stories" like this about the potential economic impacts of a higher minimum wage, what do we do to sort out what really happens? That's where research comes in.

And what does the research show?

A 2010 article in the peer-reviewed Review of Economics and Statistics reports the results of a study of employment trends in matched counties — one inside each of the states that increased its minimum wage from 1990 to 2006, and the second a contiguous county in a neighboring state that did not increase its minimum wage. The researchers found "no adverse employment effects" from increasing the minimum wage. (The minimum wage's biggest impact is on wages, not jobs — the number of jobs is determined much more by macro-economic policies than by the minimum wage.)

In addition to Commonwealth Foundation's general elevation of messaging above providing information, perhaps the results of the minimum wage research help explain why Matt makes no reference to it. The research shows that his sky is falling — job-destroying, crocodile tears ("you'll hurt the low-income workers you are trying to help") messages don't fit with the facts. Therefore, you need to modify your policy posit ... make no reference to the facts.


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