On May 27, Michigan enacted legislation that will raise the minimum wage paid to workers in the State to $9.25 per hour by 2018. While opponents of such an increase often predict that job losses will result, findings in an upcoming Upjohn Press book show that, if employment declines as a result of an increase in the minimum wage, such an effect is too small to be statistically detectable.
In What Does the Minimum Wage Do?, Dale Belman and Paul J. Wolfson subject scores of published studies to meta-analysis to produce a statistical summary that clarifies a variety of effects linked to minimum wage increases, including levels of employment. The studies were based on data mostly from the United States but also from other countries. The authors’ comprehensive analytical efforts allow them to conclude the following:
- Moderate increases in the minimum wage, characteristic of the United States over the last half of the twentieth century, have the effect that was intended by original supporters of the legislation; increasing the minimum wage substantially increases the earnings of those at the bottom of the income distribution and reduces wage inequality.
- Negative effects on employment resulting from increases in the minimum wage were too small to be statistically detectable in the meta-analysis. The authors conclude that employment effects are too modest to have meaningful consequences for public policy in the dynamically changing labor markets of the United States.
- Evidence of positive spillover effects on the wages of those earning slightly more than the new minimum wage is mixed, but generally supports their existence, particularly for women.
- The bottom line for Belman and Wolfson is that the minimum wage should be seen as one of a set of public policy tools aimed at improving the standard of living of the less well-off, and moderate increases in the minimum wage would likely aid low income individuals and families with acceptable costs to the nation.
View more information on What Does the Minimum Wage Do?
Read a synopsis of the book’s findings in the Employment Research article by Belman and Wolfson titled “The New Minimum Wage Research.”