Few issues are as contentious in this country as the minimum wage. Various reports over the years have claimed that raising the minimum wage causes businesses to shed entry-level jobs, while others have questioned the impact it has on reducing poverty.
However, a study which will be published in this month’s The Review of Economics and Statistics has dispelled each of these two complaints about raising the minimum wage.
According to the study, raising the minimum wage increases the overall incomes of affected workers, and more than that, the study found that there have been “no detectable employment losses from the kind of minimum wage increases we have seen in the United States.”
Researchers looked at the effect of raising the minimum wage on earnings and employment for the restaurant and retail industries between 1990 and 2006. They focused on counties that share borders, but have a different minimum wage. In this way, they were able to compare the long-term effects that raising the minimum wage had on employment in different regions.
The study found that a higher minimum wage had a slightly positive – though statistically insignificant – effect on employment in the restaurant industry, while retail employment did not really change when considering minimum wage, largely because retail workers generally make more money to begin with. For both industries, researchers proved that a higher minimum wage at least does not cost jobs.
Of those who are paid minimum wage in this country, roughly 58% work in the retail and restaurant industries, which is why the researchers chose to focus on them. But they speculate that these findings should apply to minimum wage workers in other sectors as well.