Recently enacted state minimum wage laws may have cost the economy 100,000 to 200,000 new jobs, according to an analysis published by the Federal Reserve Bank of San Francisco on Monday.
In the analysis posted to the San Francisco Fed’s site, economist David Neumark reviewed the effects of the federal and state minimum wage increases that have taken place since the federal minimum wage was set at $7.25 in 2007. Neumark multiplies the increases in the minimum wages by the estimates of job losses associated with higher minimum wages taken from recent studies to arrive at his conclusion.
Neumark writes that the loss of up to 200,000 is a “small drop” that should be weighed against the higher wages for those who remain employed.
The analysis is the latest update to a long-running debate over the effects of the minimum wage. Democrats, including President Obama and Democratic presidential candidates, favor raising the federal wage floor, while Republicans have opposed such a move on the grounds that it would cause job losses.
Neumark, a professor at the University of California, Irvine, is one of the academic researchers most prominently involved in studying the effects of minimum wage laws. He wrote that “the overall body of recent evidence suggests that the most credible conclusion is a higher minimum wage results in some job loss for the least-skilled workers — with possibly larger adverse effects than earlier research suggested.” Neumark made a similar case in a recent op-ed for the Wall Street Journal.
In advocating a higher minimum wage, White House economists have highlighted a number of recent studies that have all found that minimum wage increases have resulted in either no or small job losses. In his analysis, Neumark suggested that some of the newer studies finding that minimum wages don’t hurt employment rely on comparisons between neighboring states that are not actually similar in important ways.
In February of last year, the nonpartisan Congressional Budget Office released a report finding that raising the minimum wage to $10.10 an hour, the level then favored by Obama, and indexing it to inflation would mean 500,000 fewer jobs. Such a hike would also pull 900,000 families above the federal poverty line, the report found.
This post has been updated to reflect that the analysis took into account the effects of both state and federal minimum wage increases.
