What is the Latest on the Minimum Wage?

A paper published in the NBER in January of 2021 attempts to cast new light on minimum wage research in the United States. The working paper, co-authored by Professor David Neumark and Peter Shirley is titled “Myth or Measurement: What Does the New Minimum Wage Research Say About Minimum Wages and Job Loss in the United States?”. The paper argues that, contrary to more traditional summaries of the literature, there is a clear evidence of the negative impacts of minimum wages on employment.

Concentrating on research evidence from within the United States since the early 1990s, Neumark and Shirley assembled all the available papers and literature published in the 30 years on the topic. Neumark and Shirley identified the core estimates and the key takeaways from the authors and researchers on each study. After assembling all of the literature, they find that almost 80% of studies in the literature suggest negative employment effects from raising the minimum wage.

There were several other takeaways from Neumark’s research. For instance, the evidence that the minimum wage had strong, negative employment effects was far more robust for certain populations, such as teens, young adults, and the less educated. At the same time, while studies of low wage industries broadly show negative employment effects, the research is not as decisively one sided.

The evidence is not unambiguous, with some research in specific categories (such low-skilled workers) showing net zero or even positive effects from raising the minimum wage. But, as the paper shows clearly that most of the evidence indicates that “minimum wages reduce low-skilled employment.” And that “It is incumbent on anyone arguing that research supports the
opposite conclusion to explain why most of the studies are wrong.”

See here for Neumark & Shirley working paper.