Seattle (TheStreet) -- Minimum-wage laws destroy jobs, right? That's what you hear, and that's what you'd expect because demand curves slope down. Put in a wage floor, and businesses will hire less. Makes sense.
Strange thing is, it's not true. Look at sixty four studies of the subject, and all the ones with high statistical significance put the employment effect right at zero -- no job loss.
(se is standard error; 1/se is a measure of statistical significance. Employment elasticity is the employment response to minimum wage increases; -.1 means a 10% increase results in 1% less jobs.)
Given that demand curves do, indeed, generally slope down, how do you explain this?
The most impressive recent work on minimum wages and employment compares adjacent counties across state lines, with the states' different minimum wages and changes to minimum wages. It exploits hundreds of controlled natural experiments across the country, across decades. Almost no previous studies have had that rigor, or those controls, and none have had the sample size.
The seminal work using this method was made by Arindrajit Dube. He found little or no employment effect (within the limited range of minimum wages we've seen over the decades) but significant earnings effect. Somewhat unsurprisingly to many, higher minimum wages mean poor people earn more.
But the most fascinating findings may be contained in a November 2013 study using the same methodology, by three researchers at the Chicago Fed: Firm Dynamics and the Minimum Wage. Their findings on restaurant employment:
When you increase the minimum wage,