Or, perhaps you might prefer, considering the outrageousness of Paul Krugman's statement about the minimum wage. For he's used his Times column to insist that there is no evidence of any unemployment effects from raising the US minimum wage. Something which really isn't true at all. There may not be research that convinces Paul Krugman, there may be, in his mind a preponderance of evidence to show no effect but there's most certainly good and reasonable evidence that there is an effect.
The specific statement is here:
There’s just no evidence that raising the minimum wage costs jobs, at least when the starting point is as low as it is in modern America.
The description of the history he has quite right. It was indeed the general view that the minimum wage would have unemployment effects before the Card and Krueger paper. And since then some economists have come around to an opposing view, that at the current low levels of the US minimum wage there are no such unemployment effects. But that's a very different statement from "there's just no evidence".
On the Card and Krueger paper that started this intellectual change off I've my own criticism of it. Which can be found here. Essentially, they say they are studying the fast food industry. But they're not, they're studying the capital intensive part of it, the chain restaurants, not the individual Mon and Pops. This does actually matter:
By studying only one part of the sector we don’t in fact find out anything useful at all about the entire sector’s response to a change in the minimum wage. By looking only at the response of the capital intensive part we are ignoring the response of the labour intensive part. It really is possible that a minimum wage rise will increase the demand for labour in the capital intensive, chain, sector while reducing it by more in the labour intensive, independent, sector.
But then that's just me, someone with a knowledge of this specific industry and a smattering of economics, so what do I know?
Don Boudreaux is rather more aghast at Krugman's statement:
This statement is simply, verifiably untrue. There is indeed evidence – and lots of it – that raising the minimum wage costs jobs, even when the starting point is as low as it is in America.
Among which are papers that I have discussed around here myself. Like Clemens and Wither:
We estimate the minimum wage's effects on low-skilled workers' employment and income trajectories. Our approach exploits two dimensions of the data we analyze. First, we compare workers in states that were bound by recent increases in the federal minimum wage to workers in states that were not. Second, we use 12 months of baseline data to divide low-skilled workers into a "target" group, whose baseline wage rates were directly affected, and a "within-state control" group with slightly higher baseline wage rates. Over three subsequent years, we find that binding minimum wage increases had significant, negative effects on the employment and income growth of targeted workers. Lost income reflects contributions from employment declines, increased probabilities of working without pay (i.e., an "internship" effect), and lost wage growth associated with reductions in experience accumulation. Methodologically, we show that our approach identifies targeted workers more precisely than the demographic and industrial proxies used regularly in the literature. Additionally, because we identify targeted workers on a population-wide basis, our approach is relatively well suited for extrapolating to estimates of the minimum wage's effects on aggregate employment. Over the late 2000s, the average effective minimum wage rose by 30 percent across the United States. We estimate that these minimum wage increases reduced the national employment-to-population ratio by 0.7 percentage point.
We review the burgeoning literature on the employment effects of minimum wages - in the United States and other countries - that was spurred by the new minimum wage research beginning in the early 1990s. Our review indicates that there is a wide range of existing estimates and, accordingly, a lack of consensus about the overall effects on low-wage employment of an increase in the minimum wage. However, the oft-stated assertion that recent research fails to support the traditional view that the minimum wage reduces the employment of low-wage workers is clearly incorrect. A sizable majority of the studies surveyed in this monograph give a relatively consistent (although not always statistically significant) indication of negative employment effects of minimum wages. In addition, among the papers we view as providing the most credible evidence, almost all point to negative employment effects, both for the United States as well as for many other countries. Two other important conclusions emerge from our review. First, we see very few - if any - studies that provide convincing evidence of positive employment effects of minimum wages, especially from those studies that focus on the broader groups (rather than a narrow industry) for which the competitive model predicts disemployment effects. Second, the studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger disemployment effects for these groups.
My own understanding (which can of course be flawed) of the standard state of play of the minimum wage debate is that such wages of less than 45 to 50% of median wage have little effect. Simply on the grounds that few people ever do get paid such relatively low wages so banning them doesn't make much difference to anything at all. Above 50% then we do indeed start to see reasonably significant unemployment effects. Something we can intuit in fact given that one of the major modern scholars, Dube (along with Mischel et al at the EPI), someone who is quite keen on the minimum wage as a policy tool, actually recommends that it be set at $12: 50% of US median full year full time wage.
But Krugman's statement, that there's no evidence at all, even at these low rates, is just not true.
