Two things to consider with the current minimum wage debate: 1) What does empirical evidence say? 2) What does common sense say?
Economist Mark Wilson reports that “the main finding of economic theory and empirical research over the past 70 years is that minimum wage increases tend to reduce employment,” particularly among low-wage, low-skilled workers. This confirms one of the most comprehensive and authoritative recent studies, which aggregates two decades worth of data to reach the same conclusion. Yet proponents of the minimum wage increase can surely point to some studies supporting their position. How to make sense of this? Don Boudreaux observes:
Someone can always challenge even the most consensus-supported studies as having left out important variables, gotten causality backwards, employed inappropriate aggregation, examined inappropriate time periods, and on and on.
You want to find empirical studies that show free trade to be harmful to free-trading nations? No problem; you can find them. You want to find empirical studies that show government stimulus spending to be a sure-cure for what ails a slumping economy? There are plenty of such data-rich studies out there. You want to find empirical studies that show that violent crimes aren’t deterred by the death penalty? Not a problem. You want to find empirical evidence that increased rates of handgun ownership increase citizens’ likelihood of dying of gunshot wounds? Many such studies are available.
You can also find plenty of empirical studies showing the opposite of what is shown by all of the above studies. And these other studies are, as a group, no less carefully done than are the studies that they contradict. And these other studies, also, are done by scholars no less credentialed and no less objective than are those scholars who produce the contrary findings.
Welcome to social science.
Common sense, however, is unequivocal: When the price of something increases buyers demand less of it. When the cost of hiring low-skilled labor rises, fewer low-skilled workers become employed. Ironically, proponents of the minimum wage hike concede this principle if we suggest raising the minimum wage to $100 per hour. But if it’s true at $100 per hour, why is the principle less true when lifting the minimum wage to $9 per hour?
One may argue that the benefits to those earning the higher minimum wage may outweigh the costs to those low-skilled workers priced out of the market as a result, but if one argues that the policy change will yield no adverse consequences for low-skilled workers, he needs to offer a compelling reason why economic basics and common sense–which apply to every other good or service on the market–can be scrapped in this case.
