Minimum Wage Increases

The U.S.'s federal minimum wage is set to rise in a few days. This is part of a three step increase passed in 2007. A new editorial by David Neumark in the Wall Street Journal provides some analysis of the minimum age with particular attention to raising it at this time:

Based on 20 years of research, I doubt there is ever a goodtime to raise the minimum wage. However, with the aggregate unemployment rate at 9.4%, the teen unemployment rate exceeding 22%, and the unemployment rate for black teens nearing 40%, next month's increase seems like the worst timing possible.

Despite a few exceptions that are tirelessly (and selectively) cited by advocates of a higher minimum wage, the bulk of the evidence -- from scores of studies, using data mainly from the U.S. but also from many other countries -- clearly shows that minimum wages reduceemployment of young, low-skilled people. The best estimates from studies since the early 1990s suggest that the 11% minimum wage increase scheduled for this summer will lead to the loss of an additional 300,000 jobs among teens and young adults. This is on top of the continuing job losses the recession is likely to throw our way.

The reduction in jobs for youths might be an acceptable price to pay if a higher minimum wage delivered other important benefits. Many people believe, for instance, that it helps low-income families. Here, too, the evidence is discouraging. There is no research supporting the claim that minimum wages reduce the proportion of families living in poverty. Research I've done with William Wascher of the Federal Reserve Board and Mark Schweitzer of the Cleveland Fed indicates that minimum wages increase poverty.