devoish (98.76)

Minimum Wage Followup

July 16, 2009 – Comments (6)

In an earlier post on minimum wage I challenged the claim that minimum wage increases, increase unemployment.

Worse, I even suggested it might create jobs. Twenty six replies later, plus a Whereaminow blog and its additional 26 replies later, guess what.

The evidence is inconclusive. Studies of the claim that it costs jobs, just as the claims that is does not, are not conclusive. Although IMHO and certainly not Dave's, the credible data suggests a slight increase in jobs, or nothing. For those who would diligently look for themselves, here is a link to a compilation of serious work on both sides of the issue. Some of it is junk, some very good.

Because I promised a follow-up post to my first, with additional information on my data, here it is.

I knew, when I first decided to check the claim of minimum wage related job loss, that some States have higher than Federal minimum wage laws. These States are unaffected by Federal minimum wage changes. I decided that I could compare States that were affected by Federal minimum wgae increases against those that were not. I decided such a method would help, just a little, control for the impacts of trade law changes and macroeconomic events and differences in State economies.

Fortunately our friends at Google supply a chart of State unemployment with the ability to compare multiple States at the same time.

http://www.google.com/publicdata?ds=usunemployment&met=unemployment_rate&idim=state:ST480000&q=texas+unemployment+rate+chart

I selected a whole bunch of States and compared them side by side, and for the most part the unemployment rates of each State matched pretty closely. Their unemployment increased and decreased together, suggesting that any difference in State laws or economies or wage controls were insignificant.

Not satisfied that I was correct enough, I decided to prove I was even correcter. I selected two States, one with Federal minimums and one with self imposed higher minimums to compare. I chose NY and Texas, the second and third largest economies in the Nation.

Three times the Federal Gov't forced Texas to raise minimum wage, and three times Texas unemployment was better than NY.

Rather than look any deeper, I shared my results, mocked their weakness and went to other tasks.

When I returned there was some discussion, mostly in agreement with me that my data was insufficient to prove anything, and also some religious fanatics.

The sensible discussion included theorising a variety of other possibilities for Texas outperformance. Since they did not check their theories, I ignored their theories and checked some of my own.

it is this additional data that I said I would post about. And as I said, it is not "all that"

Texas and NY unemployment matched each other except for the three times that the Fed forced Texas increases. However it turns out only one is a valid comparison of not changing the minimum to changing it. The three times that unemployment was different matched the dates of Federal increases. Unfortunately two of them matched dates that NY also increased rates on their own. So obviously they are not a valid comparisons of increasing to not increasing.

So there is only one time that Texas increased its minimum that NY did not, and Texas unemplyment was lower than NY.

Also in 2000, NY increased its minimum and Texas did not. The following year, in a time of bottoming unemployment for both States, NY matched Texas unemployment, and the next year, 2002, NY unemployment was lower, in a time of rising unemployment for both States.

Like I said, its not "all that".

Thank you for your indulgence.