Friday, December 9, 2016

An Open Letter to Barry Ritholtz

Barry Ritholtz
Mr. Ritholtz:
Writing at Bloomberg, you assert that it is “well-established” that modest increases in the minimum wage cast no low-skilled workers into the ranks of the unemployed (“Minimum-Wage Foes Tripped Up by Facts,” Dec. 7).  With respect, you are obviously quite unfamiliar with modern research on the employment effects of minimum wages.  Here’s a list only of some of the more prominent, recent scholarly empirical studies whose authors that find that even modest hikes in minimum wages destroy some jobs:
– Jeffrey Clemens and Michael Wither, “The Minimum Wage and the Great Recession: Evidence of Effects on the Employment and Income Trajectories of Low-Skilled Workers” (2014) (finding that “minimum wage increases reduced the national employment-to-population ratio by 0.7 percentage point”);
– Jeffrey Clemens, “The Minimum Wage and the Great Recession: Evidence from the Current Population Survey” (2015) (finding that minimum-wage increases during the Great Recession “reduced employment among individuals ages 16 to 30 with less than a high school education by 5.6 percentage points”);
– Jonathan Meer and Jeremy West, “Effects of the Minimum Wage on Employment Dynamics” (2013) (finding that “the minimum wage reduces job growth over a period of several years.  These effects are most pronounced for younger workers and in industries with a higher proportion of low-wage workers”);
– David Neumark, J.M. Ian Salas, and William Wascher, “More on recent evidence on the effects of minimum wages in the United States” (2014) (finding that “the best evidence still points to job loss from minimum wages for very low-skilled workers – in particular, for teens”);
– Yusuf Soner Baskaya and Yona Rubinstein, “Using Federal Minimum Wages to Identify the Impact of Minimum Wages on Employment and Earnings across the U.S. States” (2012) (finding that “[m]inimum wage increases boost teenage wage rates and reduce teenage employment”).
Indeed, you can read a whole book on the matter by David Neumark and William Wascher, Minimum Wages (2008), published by the MIT Press, that concludes that minimum wages do indeed destroy some jobs.
You can dispute the accuracy of all of the above findings, but you cannot dispute that these findings, along with many others that reach similar conclusions, are part of the scholarly record – a record that belies your assertion that it is “well-established” that modest minimum-wage hikes destroy no jobs
Your readers deserve better from you.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030
The above originally appeared at Cafe Hayek.


  1. Well, I'm gonna put my neck in the noose here:
    It's an obvious fact that minimum wage laws put some low income people out of work.
    But, what I would like to know is, "does the aggregate salary of those thrown out of work exceed the INCREASE in salary of those still employed and paid that minimum wage?".
    No ideological ax grinding here, I just would like a data point.

    1. Not sure about the data but, if you increase minimum wage (or implement any employment regulation), then ceteris paribus you decrease the possible universe of allowable compensation arrangements. So I think you can say a priori that, to the extent the regulation is effective at actually elinating people's options, it causes a decrease in the efficiency of capital allocated to labor and to productivity generally.