New research says raising minimum wage has few negative effects on jobs — even during recessions

New research says raising minimum wage has few negative effects on jobs — even during recessions

President Joe Biden is pushing to increase the minimum wage to $15 an hour as part of his American Rescue Plan stimulus package.

Separately, a Democratic group of lawmakers is proposing a standalone bill to raise the minimum wage to $15 an hour by 2025.

Some lawmakers and business owners who oppose the idea say it would add insult to injury for the leisure and hospitality industries that have already taken a huge hit during the pandemic-induced recession.

Economists generally agree that it’s better to start raising the minimum wage while the U.S. economy is expanding and the unemployment rate is relatively low.

However, there’s another school of thought raised by new research that suggests an increase in the minimum wage during an economic downturn may actually be less harmful than some business owners fear.

That’s according to a new analysis published by economists at the University of Massachusetts Amherst and University College London and a data scientist from OM Partners, a supply chain management software and consulting company.

It was circulated by the National Bureau of Economic Research on Monday. 

Related: What minimum-wage increases did to McDonald’s restaurants — and their employees

The researchers studied 172 state-level minimum wage increases that took place from 1979 to 2019. Using demographic data from the U.S. Census Bureau’s Current Population Survey, they created a subgroup that captured outcomes for 75% of all minimum wage workers. 

They found “no indication” that minimum wage has a negative effect on the overall unemployment rate, labor-force participation rate, or on overall labor-market transitions.

In general, it boosted wages for workers with minimal job losses.

However, there was one crucial exception: Black and Hispanic workers. The researchers found they were potentially made worse off, and experienced a drop in employment and labor-force participation.

In fact, Black and Hispanic workers were the only groups to experience a negative employment change resulting from minimum-wage hikes. All other demographics saw a positive change in employment.

However, the data that pointed to this outcome did not allow the researchers to make a definitive conclusion that increasing the minimum wage disproportionately harms Black and Hispanic workers. 

Overall, their research aligns with Treasury Secretary Janet Yellen’s views on minimum wage — that it helps more workers than it harms. 

Research published by the Congressional Budget Office, a nonpartisan federal agency, estimated that raising the wage to $15 an hour by 2025 would result in a median of 1.3 million job losses, though the same number of people would no longer be living below the federal poverty line if a $15-an-hour minimum wage were enacted. 

Overall, CBO found, wages would rise for some 17 million workers.

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