Study Links Minimum-Wage Increases To Job Growth

A recent study by the Center for Economic and Policy Research attempts to undercut the argument that raising the minimum wage kills jobs.

The study, which updates a Goldman Sachs analysis to include data from April and May, shows that the 13 states that increased their minimum wages on Jan. l have had stronger employment growth than the 37 states that didn't. The study compared average employment during the first five months of 2014 with the last five months of 2013.

The average change in payrolls in the 13 states that increased their minimum wages was 0.99% vs. 0.68% in the other states. On January 1, Connecticut, New Jersey, New York and Rhode Island boosted their pay floors as a result of legislation. The other nine states — Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Vermont and Washington – automatically raised their minimums by smaller amounts based on inflation.

CEPR acknowledges that analysis is far from scientific and makes no direct link between raising the minimum wage and payroll gains. Still, "it does provide evidence against theoretical negative employment effects of minimum wage increases," CEPR researcher Ben Wolcott writes.

Critics of minimum wage increases argue they increase business costs, forcing employers to lay off workers or hire fewer people.

But CEPR senior economist John Schmitt says one reason minimum pay hikes actually could bolster employment growth is that they help businesses can openings more quickly. Big employers of low-wage workers, such as fast food chains, virtually always have job vacancies, he says.

Another reason, he says, is that low-wage workers tend to spend nearly all of their extra cash, lifting the local economy and creating more jobs.


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