Many posters will arrive at the conclusion that raising minimum wage costs jobs. The theory goes like this: The USA raises minimum wage, then the employers costs go up, then the employer raises prices, then the price increase costs customers and the employers business declines, then the employer lays off an employee.
The contrarian in me challenges this theory with one of my own: The USA raises minimum wage, then more people have extra money, then more people spend money, then business increases, then business hirers more employees.
And another: The USA raises minimum wage, there is no competitive advantage to one business over another, it doesn't matter.
Fortunately this is a science project. With controls.
In the USA there are States that set their minimum wage higher than the Federal minimum. Because Federal minimum wage does not affect States with higher minimums they can serve as a control.
In the USA there are States with no minimum wage except the Federal minimum. These States can serve as the test group to see how Federally mandated minimum wage changes affected their unemployment rates.
Then, we can compare.
Here is a wiki page showing States with minimum wages that are higher, lower, or the same as the Federal minimum.
Here is a chart of Federal minimum wage changes. Over time the changes have applied to more and more of the economy until, in 1978, the law became most similar to what exists today.
Here is a chart of State unemployment since 1990 covering minimum wage increases in 1990 and 91, 1996,and 97, and 2007/8/9. On the left you can select for whichever individual States you choose.
I selected Texas, a State that matches the Federal minimum wage and is affected by its changes, and NY, a State with a higher than Federal minimum wage and is unaffected by changes in the Federal minimum, and compared their unemployment rate side by side.
During the 1990/91 wage increase, a time of rising unemployment for both States, NY, which was unaffected by the Federal minimum increase did worse than Texas which was affected by the increase.
During the 1996/97 wage increase, a time of falling unemployment for both States, NY except for having a worse 2yr bump as the Fed Gov was raising the Texas wage performed the same.
During the 2007/8 wage increase, unemployment in Texas has done much better then NY. The effect of the upcoming 2009 increase is as yet unknown.
Now I hope many of you are saying to yourselves this is a lousy science experiment because of the volume of uncrontrolled variables. If you are, I agree with you. If you aren't, please don't vote.
I realize this comparison is only slightly better than pulling answers out of your a**. But it is slightly better, and based upon the comparison of Texas and NY you cannot possibly conclude that raising minimum wage increases unemployment. If anything, the data says just the opposite.
For the most part the data shows that unemployment in Texas and NY has been the same, regardless of the difference in minimum wage, and even with the comparitive advantage, Texas unemployment has failed to outperform, except when and immediately after they have been forced to raise the minimum.