How to Kill the Living Wage
No link for this working paper but you can write the lead author for a copy: sjadams@uwm.edu
"The Effects of Living Wage Laws: Evidence from Failed and Derailed Living Wage Campaigns" SCOTT J. ADAMS and DAVID NEUMARK
Living wage campaigns have succeeded in about 100 jurisdictions in the United States. But living wage campaigns have also been unsuccessful in numerous cities. Some campaigns were derailed due to a state legislative or judicial decision preventing living wages. Other campaigns failed to get legislation passed at the city level due to a negative city council vote or a mayoral veto. The analysis in this paper exploits the information provided by failed and derailed living wage campaigns in estimating effects of living wage laws. These unsuccessful living wage campaigns provide a better control group or counterfactual for estimating the effects of living wage laws than the broader set of all cities without a living wage law, and also permit the separate estimation of the effects of living wage laws and living wage campaigns. The findings indicate that living wage laws raise wages of low-wage workers but also reduce employment among the least-skilled, especially broader living wage laws that cover business assistance recipients, and living wage laws accompanied by similar laws in nearby cities.
Comments (2)
It has become a truism that boosting the minimum wage increases unemployment. Yet few have bothered to see what effect this move has had when the MW was increased. Fortunately someone has done the homework:
http://www.adaction.org/mwbook.html
It turns out that following increases in the minimum wage in October, 1996 and September, 1997 the rate of job increase was higher in the low income range than it was in the higher incomes.
What is this? Observations tampering with the conclusions of the model? This can't be!
Published: September 25, 2004 7:48 PM
michael:
First, correlation does not imply causation. As you write:
"It turns out that following increases in the minimum wage in October, 1996 and September, 1997 the rate of job increase was higher in the low income range than it was in the higher incomes."
If I remember correctly, those increases were small, which brings me to the following.
There is a simple criticism concerning minimum wage studies: it is nearly impossible to study (regress) the impact of an increase in the MW with job growth. Why? Because there has never been a huge increase in the former to be statistically significant. Thus, it is statistically naive to regress an increase in the MW against job growth/aggregrate labor participation.
However, if you want another paper showing that the MW has a negative impact on employment, see this.
Published: September 26, 2004 1:10 AM