Via Mark Thoma comes an interview with economist Arindrajit Dube about his research on the minimum wage:

In an interview with The Real News, Arindrajit Dube, labor economist and Assistant Professor of Economics at University of Massachusetts, said that increasing the minimum wage in some areas has not reduced jobs as expected by the conventional theory.

Dube said the conventional wisdom surrounding minimum wage comes from research done before the early ‘90s. … Dube told TRNN that around the early to mid ‘90s some economists realized these studies were badly flawed, and began looking at local evidence instead of just national evidence. The famous work of labor economists David Card and Alan Kruger looked at the border of New Jersey and Pennsylvania when New Jersey raised its minimum wage. Within a year, he said, not only had employment in New Jersey not decreased, it had actually risen in some groups.

He said the report received strong criticism from the economic community, but Dube’s studies apply this technique across borders of all the states, over a twenty year period to track the effects in many cases, and for a much longer period.

Dube sort of creates the impression here that the current conventional wisdom is based on outdated research, which is not the case. While the conventional wisdom may have been founded on research from before the 90s, the majority of post Card and Kruger research, what has been called “the new minimum wage research”,  supports the notion that minimum wages decreases employment. For instance, a 2006 paper from David Neumark and William Wascher summarizes the new minimum wage research like this:

The studies surveyed in this paper lead to 91 entries in our summary tables (in some cases covering more than one paper).  Of these, by our reckoning nearly two-thirds give a relatively consistent (although by no means always statistically significant) indication of negative employment effects of minimum wages—where we sometimes focus on results for the least-skilled—and fewer than 10 give a relatively consistent indication of positive employment effects.  In addition, we have highlighted in the tables 20 studies that we view as providing more credible evidence, and 16 (80 percent) of these point to negative employment effects.  Correspondingly, we have indicated in our narrative review that, in our view, many of the studies that find zero or positive effects suffer from various shortcomings.

This is consistent with their 2008 book, Minimum Wages, which I don’t have on me at the moment.

In any case, I have not read Dube’s paper but it looks like an interesting extension of Card and Kruger. In the meantime, the majority of the new minimum wage research supports the hypothesis that the minimum wage increases unemployment.

About these ads