Ed Glaeser Argues Against Raising the Minimum Wage

Ed Glaeser may be the foremost urban economist in the world. Ed’s review in the Wall Street Journal of Robert Gordon’s book The Rise and Fall of American Growth is worth reading for many reasons. But I want to highlight what Ed says about the minimum wage:

The one point where I disagree with Mr. Gordon is his suggestion that “2015-16 is a particularly appropriate time to raise the minimum wage.” My fears about underemployment lead me to be far less enthusiastic than Mr. Gordon about the minimum wage, or any labor market regulation. If we want more employment of less skilled workers, then we should cherish, not punish, those companies that employ less skilled workers. A recent paper by Jeffrey Clemens (a former student of mine) finds that the minimum wage seems to have reduced employment for at-risk groups during the great recession. Morally, it seems reprehensible to expect the costs of social-welfare policies to be paid for disproportionately by the customers and employers of lower-wage workers.

Note: Jeffrey Clemens writes this in the abstract for his paper:

I analyze recent federal minimum wage increases using the Current Population Survey. The relevant minimum wage increases were differentially binding across states, generating natural comparison groups. I first estimate a standard difference-in-differences model on samples restricted to relatively low-skilled individuals, as described by their ages and education levels. I also employ a triple-difference framework that utilizes continuous variation in the minimum wage’s bite across skill groups. In both frameworks, estimates are robust to adopting a range of alternative strategies, including matching on the size of states’ housing declines, to account for variation in the Great Recession’s severity across states. My baseline estimate is that this period’s full set of minimum wage increases reduced employment among individuals ages 16 to 30 with less than a high school education by 5.6 percentage points. This estimate accounts for 43 percent of the sustained, 13 percentage point decline in this skill group’s employment rate and a 0.49 percentage point decline in employment across the full population ages 16 to 64.

I collected links for other posts on supplysideliberal.com about the minimum wage here.