Busting a Myth: Minimum Wage Increases Don’t Lead to Job Losses

“We’re telling small business owners that not only are we going to raise their costs by a buck and a quarter, but we’re also going to raise it with these cost-of-living adjustments. Here’s what’s going to happen – they’re going to have to lay people off.” – Gov. Christie, June 7

Those opposed to raising New Jersey’s minimum wage argue that doing so – particularly during a fragile economic recovery – will hamper the state’s economy and lead employers to cut jobs to cope with the increased cost of labor.

If this were true, one might expect the eight states that increased their minimum wages on January 1 of this year to be suffering job losses and crawling out of the downturn at a slower rate than other states.

But that’s not the case.

In fact, those eight states are experiencing more robust job growth than the nation as a whole – and they certainly aren’t losing jobs.

The eight states – Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont and Washington – have seen total nonfarm payroll jobs increase by 0.9 percent from December 2011 to June 2012 (from 22,286,900 to 22,483,400), according to the Bureau of Labor Statistics. Meanwhile, the U.S. has seen total nonfarm payroll jobs increase by slightly less – 0.7 percent.

The data from this year shouldn’t come as a surprise, as most academic research has found that raising the minimum wage doesn’t result in job losses – even during difficult economic circumstances.

As the Center for American Progress noted in June, “there are at least five different academic studies focusing on increases to the minimum wage—including increases ranging from 7 percent to 12.3 percent made during periods of high unemployment—that find an increase in the minimum wage has no significant effect on employment levels. The results are likely because the boost in demand and reduction in turnover provided by a minimum wage counteracts the higher wage costs.”

In addition, the Center for American Progress ran a simple analysis of state minimum wage increases, and found a similar result: “the average state that increased its minimum wage had 12-month job growth that mirrored the national average, with most states doing slightly better than the national average.”

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