January 3, 2012 | 9:17 AM | By

Minimum Wage Raises and Unemployment

A number of states have raised their minimum wages with the start of the new year, rekindling a debate over whether such wage hikes reduce poverty or increase unemployment.

The federal minimum wage is $7.25. D.C.’s minimum wage is one of the highest in the nation, at $8.25 an hour. Only Vermont, Oregon and Washington have higher minimum wages.

Some pro-business groups and economists argue that high minimum wages discourage employers from hiring workers. Unemployment is high in D.C. neighborhoods that are home to many low-skilled workers, the kind of workers who typically take minimum wage jobs. Do you think lowering the minimum wage would get more people hired?


“I don’t think there’s any sensible economist who thinks you could double the minimum wage and not throw a lot of people out of work,” says David Neumark, director of the Center for Economics and Public Policy at University of California, Irvine. There is a debate, he says, over the effect of incremental raises for the small group of largely unskilled workers who earn the minimum wage.

“The consensus from a lot of studies I’ve surveyed — including my own — says that a 10 percent increase in the minimum reduces employment of those very low-skilled groups by about 1 to 2 percent,” he says.

Keep in mind, that’s 1 to 2 percent of the people earning minimum wage, and they make up only about 5 percent of the workforce nationally. So the job losses are pretty tiny.

Defenders of the minimum wage say it’s even less than that, pointing to a couple of recent studies that show zero net job loss. David Cooper, an analyst with the pro-labor Economic Policy Institute, says the minimum wage is especially necessary now.

“When you have lines of the unemployed around the corner looking for jobs, there’s no real pressure for employers to raise wages,” Cooper says.

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