How do minimum wage increases affect jobs? A simple way of looking at it

An incredibly simplistic argument breaks out every time liberal groups push to raise the federal minimum wage. We'll lose jobs, opponents say. No we won't, supporters say.

There's a large body of rigorous economic research devoted to that subject. It includes a lot of counterfactuals: If the wage hadn't gone up, would the economy have created more jobs, and if so, how many? There are some studies that find higher minimum wages hamper job creation; a recent and comprehensive survey of studies, by economists Dale Belman and Paul J. Wolfson, finds no statistically significant effect on jobs from the relatively modest federal minimum wage hikes across U.S. history.

Those nuances don't come out often in political debates.

That's why some researchers at the National Employment Law Project — which advocates in favor of raising the federal minimum — have produced possibly the most un-nuanced analysis of the effects of minimum wage hikes that you'll ever see. Its researchers, Paul K. Sonn and Yannet M. Lathrop, went back and looked at each of the 22 instances since 1938 in which the United States raised its federal minimum wage. They looked at what followed with employment overall, and what happened in the leisure/hospitality and retail sectors, where minimum-wage jobs are often concentrated.

They did not look at counterfactuals. They did not look at rates of change. They simply asked one question: One year after the wage went up, were there more jobs or less?

They found that 68 percent of the time, total jobs went up across the economy. Retail jobs increased 73 percent of the time. Hospitality employment rose 82 percent of the time. The researchers say business cycles explain the instances when employment fell: Each of those times, they write, the economy had entered or just come out of a recession, or was about to enter one.

“It shows that the predictions of, 'when you raise the minimum wage, jobs will go down,' are not supported by the evidence, full stop,” Sonn said in an interview. “It’s taking them at face value and seeing if they’re borne out.”

This is a useful talking point for raise-the-wage supporters. It is less useful as an economic study. There are plenty of reasons total employment could keep rising even if minimum-wage hikes were holding down job growth, the simplest being, the economy was growing at a strong enough clip to offset any damage from the hike. This is why economists prefer work that attempts to isolate the effects of a minimum-wage increase, through more sophisticated means such as regressions.

But the point of the paper isn't scholarly rigor — it's an attempt to undermine opponents' simplest, strongest argument against a wage hike. Researchers say they are merely complementing the existing economic literature on the subject. “It’s not a regression, academic-type study," Sonn said. "It’s instead, a direct fact-checking in response to what opponents always claim.”

That's an important caveat.