Minimum Evidence

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The Heritage Foundation published a memo last week on why raising the minimum wage would be an “outright disaster” for American workers. The memo parrots familiar conservative objections to minimum wage laws, making use of virtually no data while reciting familiar capitalistic slogans. Think Progress decided to look into the memo’s major claims:

Heritage Claim: Minimum wage increases unemployment

Heritage Evidence for Claim: One-third of surveyed economists at top universities “agree outright” with the statement, “a minimum wage increases unemployment among the young and unskilled” (yes, 1/3 agreement is actually cited as proof of “consensus”).

FACT: In three states with recent minimum wage increases, data shows the increase had no effect on job growth. A well-regarded 1994 study determined that an increase in the New Jersey minimum wage did not lead to any measurable impact on employment.

Heritage Claim: States with high minimum wages experience economic “stagnation.”

Heritage Evidence for Claim: None

FACT: Hawaii, Delaware, and Vermont, three states with higher minimum wages, were among the 15 states with unemployment rates less than 5 percent as of December 2003, when the national average was 5.7 percent.

Heritage Claim: Minimum wage increases have no effect on “real wages.”

Heritage Evidence for Claim: Since 1997, real wages have risen despite no increase in the federal minimum wage (indeed, this is not really evidence, but it is the only thing offered).

FACT: Numerous studies have found that a minimum wage increase has a “ripple effect” for workers above the “old” minimum wage rate but below the “new” minimum wage rate. These workers often receive a new wage rate that is above the new minimum wage (Spriggs and Klein 1994, pp. 12-13).

FACT: A minimum wage increase of $1.85 by 2006 would raise the wages of 7.4 million workers.

FACT: A study of a 1999 state minimum wage increase in Oregon found that as many as one-half of the welfare recipients entering the workforce in 1998 were likely to have received a raise due to the increase. After the increase, the real hourly starting wages for former welfare recipients rose to $7.23.

Heritage Claim: Increasing the minimum wage would “hobble the U.S. economy — especially the capacity of the economy to generate prosperity for the least skilled among us.”

Heritage Evidence for Claim: The untested theory that increasing the minimum wage “operates by removing the lowest rung on the economic ladder.”

FACT: Following the most recent increase in the minimum wage in 1996-97, the low-wage labor market performed better than it had in decades (e.g., lower unemployment rates, increased average hourly wages, increased family income, decreased poverty rates).

FACT: In Oregon, the fully phased in wage increase “reversed years of declining wages for welfare recipients and other low-wage workers.”

FACT: Raising the minimum wage increases consumers’ purchasing power, thereby putting more money back into local economies. Increases in the salaries of higher-wage workers are more likely to go toward savings because their wages already cover their basic needs.