Income Inequality Symposium: No, economists do not all agree on the impacts of minimum wage increases

(Previous posts on the symposium are here and here.)

The third panel was a presentation by three University of Washington economists (Marieka Klawitter, Mark Long and Bob Plotnick). The Income Inequality Advisory Committee had commissioned a study from them looking at who would be affected by a minimum wage increase. The paper specifies that its analysis does not contemplate the possibility that

businesses may close or relocate and thus reduce the size of their workforce or the number of hours worked. It does not include an estimate of a change in labor supply, including changes in the skill and composition of persons who would seek more or fewer hours given the higher wage.

Still, all three professors had signed on to the letter from hundreds of economists supporting an increase in the national minimum wage to $10.10. A similar letter was signed by hundreds of economists opposed to the increase—including three other UW economists, who were presumably not invited to participate in the symposium.

Next up was a panel consisting of Michael Reich and Ken Jacobs, economists at the University of California-Berkeley. They also prepared a report for the Income Inequality Advisory Committee, which is more measured than their presentation. They write,

our assessment of the research evidence indicates that minimum wage mandates raise the incomes of low-wage workers and their families, and that the costs to businesses are absorbed largely by reduced turnover costs and by small price increases among restaurants. That said, it is important to emphasize that existing research is necessarily limited to the range of minimum wage increases that have been implemented to date. While these studies are suggestive, they cannot tell us what is likely to happen when minimum wages are increased significantly beyond current local, state, or general mandates.

Additionally, “Labor economists continue to debate the actual impacts of the minimum wage on employment and hours.” To be sure, this is a controversial area. Many studies have found that there are indeed employment impacts—for example, work by economists David Neumark, Jonathan Meer and Jeremy West (who would have been good additional speakers for the symposium). (See our report on SeaTac’s Proposition 1 for more.)

At this point, when questions were allowed, two Seattle restaurant owners stood up to talk about their restaurants, and to talk about how this would affect them. One mentioned a chef in San Francisco who said that all of the cost increases being imposed there are having a negative cumulative impact; Reich and Jacobs cut her off, saying that anecdotes like that just don’t fit the data. (The audience, by the way, applauded the economists for interrupting the business owners.)

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