One economic theory says that raising the minimum wage causes employers to hire fewer workers.
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Theories don’t always prove to be true when put to the test in the real world.
In “Low Wages Do Not Cause Poverty,” Kimberly Amadeo cited a literature review published in 2006 by David Neumark and William Wascher. The abstract states, “Our review indicates that there is a wide range of existing estimates and, accordingly, a lack of consensus about the overall effects on low-wage employment of an increase in the minimum wage.” In other words, different studies find different results.
To be fair, Neumark and Wascher do say that studies focused on unskilled, low wage labor find raising minimum wages has a negative effect on the number of jobs available. However, it is not that simple.
Effects of Raising the Minumum Wage
Isabel V. Sawhill at the Brookings Institute believes that raising the minimum wage is only one way to help working families. She writes that by itself a higher wage will not make much of an impact on the working poor. However, when combined with policies that boost earnings (such as the Earned Income Tax Credit,) policies that lower unemployment and increased funding for and access to education, raising the minimum wage is one important puzzle piece necessary for working families to move into the middle class.
San Francisco and San Jose
San Jose, California voters followed in the footsteps of their neighbors in San Francisco and voted to raise the minimum wage in the city to $10 per hour.
If the conservative economists were correct, disaster should have ensued by now. There would be no jobs nor a thriving economy in either of the two cities.
According to Forbes, however, San Francisco’s unemployment rate is only 5.3 percent, which is lower than the national average. San Francisco enjoyed a job growth rate of 4 percent in 2012, in total defiance of conservative economic theory.
San Jose is going to be just fine.
Tell Us What You Think
Do you think the minimum wage should be raised, and why or why not? Leave us a comment or join the conversation on Twitter.