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Job Slayers or Fact Slayers? The Wall Street Journal’s flawed argument against raising the minimum wage

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Opinion pieces and speeches by EPI staff and associates.

[POSTED TO VIEWPOINTS ON SEPTEMBER 13, 2005.]

Job Slayers or Fact Slayers? 

The Wall Street Journal’s flawed argument against raising the minimum wage

By Jeff Chapman

A recent Wall Street Journal lead editorial (“Job Slayers,” August 27, 2005) retreads the worn and discredited argument that raising the state or federal minimum wage significantly decreases job opportunities for low-wage workers. In making this argument, however, the editorial board seems determined to slay the facts; the editorial contains a number of statements that are misleading or false.

It ascribes a significant part of the problem of high teenage unemployment rates to high state minimum wages (or “maximum folly” according to the editorial). This claim disintegrates, however, under even the most cursory examination. Here’s why. Teenage unemployment rose from 13.1% to 17% between 2000 and 2004. According to the Journal’s argument, the increases in teen unemployment should have been higher in states with higher minimum wages than in those with low minimum wages. What actually happened was the reverse: Teenage unemployment rose 3.4% in the high minimum wage states, compared to 4.2% in the others.

Beyond that specific claim, the Journal’s background “evidence” does not withstand examination either. For one thing, the editorial would have us believe that raising the minimum wage is an idea being drummed up by a few misguided liberal policymakers and advocates. The truth is, it would be difficult to think of a policy that is more widely supported by the public. Earlier this year, the nonpartisan Pew Research Center showed that Americans overwhelmingly support increasing the minimum wage: 82% said it was an important priority and only 6% opposed an increase. Further evidence can be found in Florida and Nevada, both “red” states where in 2004, voters opted for increasing their states’ minimum wages in far greater numbers than they did for President Bush.

Nor do economists view the issue with the monolithic disapproval that the Journal presents. Last fall, 562 economists signed a letter agreeing that “the minimum wage has been an important part of our nation’s economy for 65 years.” Further, they agreed that “as with a federal increase, modest increases in state minimum wages in the range of $1.00 to $2.00 can significantly improve the lives of low-income workers and their families, without the adverse effects that critics have claimed.” The signers included four Nobel Laureates, three of whom have served as presidents of the American Economic Association, the mainstream, economists’ professional association.

Especially egregious, though, is the Journal’s presentation of a group of studies analyzing the 1992 increase in the New Jersey minimum wage. It dismisses the well-regarded work of David Card and Alan Krueger analyzing the impact on the fast food restaurants by pointing out that telephone surveys were used to collect the data. According to the Journal, “When other researchers went back and resampled these establishments, they found widespread errors in the data.” The work of these other researchers (David Neumark and William Wascher) is presented in the editorial as evidence of the job-loss claims. But the Journal pointedly ignores some very important facts about this research. Most significantly, the Neumark and Wascher data were collected using a mix of informal personal contacts by an anti-minimum wage restaurant industry lobbyist’s in-house “think-tank” and a letter from the researchers that tipped-off the restaurants that the purpose of the research was to undermine the Card and Krueger research  (Neumark and Wascher 2000, p. 1,395). The quality of the data collected under these circumstances is suspect.

Moreover, when Card and Krueger redid their study using unassailable government data, they found the same result-thus confirming both the reliability of their earlier sample, and, more importantly, their findings–that the New Jersey minimum wage increase had no effect on total employment in that state. Neumark and Wascher acknowledge the findings of this second Card and Krueger study and conclude that using a combination of it and their own study, they could only decisively state that “New Jersey’s minimum wage increase did not raise fast-food employment in that state” (Neumark and Wascher 2000, p. 1,391), hardly the indictment of minimum wages that the Journal would lead the reader to believe.

The Wall Street Journal’s editorial board will, no doubt, continue to recycle their old arguments that minimum wages are “job killers.” However, the body of evidence and public opinion makes that position increasingly untenable. And for good reason: minimum wages are a key part of a broad public policy agenda that seeks to support the efforts of working families to make ends meet.

Jeff Chapman is an economist at the Economic Policy Institute in Washington, D.C.

[POSTED TO VIEWPOINTS ON SEPTEMBER 13, 2005.]


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