The most rigorous studies show minimum-wage increases have little to no effect on employment, a new Economic Policy Institute report finds. In The Importance of Study Design in the Minimum-Wage Debate, Daniel Kuehn of American University 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. Kuehn details why studies that compare labor markets experiencing a minimum-wage increase with a carefully chosen comparison labor market are more accurate than studies without comparisons, and how they tend to find that minimum-wage increases have little or no effect on employment. Kuehn also provides insights on the implications of this research for policymaking.
“Economic analysts universally recognize the superiority of studies that use matching methods,” said Kuehn. “The alternative methods used to conclude that minimum-wage increases reduce employment substantially would never be accepted in, for example, a federal evaluation of a job training program.”
Matching cases of minimum-wage increases to a control group is essential because it is often the closest that social scientists can get to the gold standard of an experiment using random assignment. Like the seminal evaluations of the effects of job training programs, work-sharing arrangements, employment tax credits, educational interventions, and housing vouchers, the strongest studies on the impact of minimum wage increases all use at least some sort of matching method.
“The best available studies show that modest increases in the minimum wage do not have the negative effects critics decry, but in fact provide working families with higher take-home pay,” said David Cooper, EPI Economic Analyst.