Strongest or most effective historical leaders pdf

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The most rigorous studies—those that compare labor markets experiencing a minimum-wage increase with a carefully chosen comparison labor market—show minimum-wage increases have little to no effect on employment. This paper reviews the empirical literature on the employment effects of increases in the minimum wage. It organizes the most prominent studies in this literature by their use of two different empirical approaches: studies that match labor strongest or most effective historical leaders pdf experiencing a minimum-wage increase with an appropriate comparison labor market, and studies that do not. The studies that compare labor markets experiencing a minimum-wage increase with a carefully chosen comparison labor market tend to find that minimum-wage increases have little or no effect on employment.

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The studies that do not match labor markets experiencing a minimum-wage increase with a comparison labor market tend to find that minimum-wage increases reduce employment. A better understanding of which approach is more rigorous is required to make reliable inferences about the effects of the minimum wage. The studies using the most rigorous research designs generally find that minimum-wage increases have little or no effect on employment. Application of these findings to any particular minimum-wage proposal requires careful consideration of whether the proposal is similar to other minimum-wage policies that have been studied. If a proposal occurs under dramatically different circumstances, the empirical literature on the minimum wage should be invoked with caution.

Truman just wanted a straight answer. Today, policymakers and the public also seem to want a one-armed economist in discussions of the minimum wage. Minimum-wage policy in the United States is made at the federal, state, and local level. Many states and even local governments set minimum wages that are higher than the federal minimum. One group of well-regarded economists contends that increases in the minimum wage reduce employment by raising labor costs, while another group insists the evidence shows that minimum-wage increases do not reduce employment, likely due to factors such as reduced turnover, increased productivity, and small price increases.

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Responsible economists understandably mention both strands of the literature. Nevertheless, it would be helpful if there were some way to determine which side has the more persuasive case, something a little closer to Truman’s one-armed economist. There are many criteria that could be used to make sense of the empirical literature on the employment effects of the minimum wage. A matching design is strongly preferred by economists working on a variety of applications because it is often the closest study design to randomized experiments available. Whether or not a study uses matching is a broad criterion, but an important one for discriminating between studies and clarifying who provides more persuasive evidence in the minimum-wage debate. The first section of this report reviews the two major approaches to studying the minimum wage—studies with and without matched comparison cases—and compares the major findings from these two approaches. The second section makes an argument for preferring studies that use matching over studies that do not.

The report concludes with a discussion of the implications of this research for policy. This distinction is only one of many possible ways of thinking about the empirical literature, but it is critical for answering the question of who is right about the employment effects of the minimum wage. Card and Krueger were concerned with distinguishing changes in employment at fast food restaurants that would have happened anyway from changes occurring in response to the minimum-wage increase. Their solution was to use comparable restaurants in Pennsylvania immediately across the border from New Jersey as a control group of establishments operating in a similar environment, but not subject to the minimum-wage increase. These Pennsylvania establishments provided a baseline for determining what would have happened in New Jersey if the minimum wage had remained constant. Deviation from that baseline in the New Jersey restaurants could thus be safely attributed to the minimum wage. A true experimental design would have randomly assigned increases in the minimum wage in order to control for alternative influences, but in the absence of random assignment the authors identified the next best alternative: a close match.

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