CEPR - Center for Economic and Policy Research

Multimedia

En Español

Em Português

Other Languages

Home Publications Blogs CEPR Blog 2014 Job Creation Faster in States that Raised the Minimum Wage

2014 Job Creation Faster in States that Raised the Minimum Wage

Print
Written by Ben Wolcott   
Monday, 30 June 2014 14:21

The experience of the 13 states that increased their minimum wage on January 1st of this year might provide some guidance for what to expect here in Washington, DC when the city-wide minimum wage increases to $9.50 on July 1.

At the beginning of 2014, 13 states increased their minimum wage. Of these 13 states, four passed legislation raising their minimum wage (Connecticut, New Jersey, New York, and Rhode Island). In the other nine, their minimum wage automatically increased in line with inflation at the beginning of the year (Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Vermont, and Washington state).

As CEPR noted in March and April posts, economists at Goldman Sachs conducted a simple evaluation of the impact of these state minimum-wage increases. GS compared the employment change between December and January in the 13 states where the minimum wage increased with the changes in the remainder of the states. The GS analysis found that the states where the minimum wage went up had faster employment growth than the states where the minimum wage remained at its 2013 level.

When we updated the GS analysis using additional employment data from the BLS, we saw the same pattern: employment growth was higher in states where the minimum wage went up. While this kind of simple exercise can't establish causality, it does provide evidence against theoretical negative employment effects of minimum-wage increases.

In this post, we can now bring these figures up to date with the data from April and May.

The chart below shows the percentage change in employment for each state. The baseline is the average of the employment figures for the last five months of 2013 (August to December), which is measured against the average of the employment levels for the first five months of 2014 (January to May). As was the case with the earlier analyses by GS and CEPR, employment growth is still faster in states where the minimum wage went up.

wolcott-2014-06-30

Of the 13 states that increased their minimum wage in early 2014, all but one (New Jersey) are seeing employment gains. Furthermore, nine of the remaining 12 states are above the median for this period. The average change in employment for the 13 states that increased their minimum wage is +0.99% while the remaining states have an average employment change of +0.68%. 

The experience of the 13 states that already increased their minimum wage in 2014 paints a very positive picture for Washington and its low-wage workers.


Note: All data taken from the BLS: “Regional and State Employment and Unemployment (Monthly),” Table 5, seasonally adjusted.

Comments (9)Add Comment
...
written by Gene, July 01, 2014 1:48
Using BLS D-1. Employees on nonfarm payrolls by State and major industry, seasonally adjusted (formerly table B-7)I used your same methodology (I think) but with a narrower scope of "Hospitality and Leisure" employment for the top 3 States (Col, Wash, and Oregon) identified in the graphic as States that implemented a higher min wage in 2014.

I took the average employment, in that category alone, from Aug-Dec 2013 and Jan-May 2-14 and found the percentage change in those two time periods.

Here is what I found (subject to correction--I am not an economist nor a mathematician):

Colorado: +2.78% change (compared to 2.10 overall)
Oregon: +1.67% change (compared to 1.68 overall)
Washington: +1.75% change (compared to 1.79 overall)

I did not expect this outcome. I expected it to lag behind the overall rates of growth.

I think it MIGHT be worthy of closer examination of the particular categories of employment that tend to be minimum wage intensive and compare it to the overall growth rates.

Again, I am not professional and I welcome correction.

...
written by Gene, July 01, 2014 2:12
Using the Customized Table function at BLS I just looked at a deeper subset of "Leisure and Hospitality", "Accommodation and Food Service" where MOST of the Leisure and Hospitality employment occurs.

Percent changes:

Colorado: +2.9%
Oregon: +1.67
Washington: +1.67%

If one is a proponent of increasing the min wage and believe in the minimum dis-employment effects, this might be supporting evidence.

Thanks again.
Chicken or Egg?
written by Denny Rivera, July 02, 2014 4:43
Those states experienced more job growth, but maybe that's why they were able to rais the minimum wage! Which came first, the wage increase or the job growth.
Chicken or Egg? cot'd
written by Denny Rivera, July 02, 2014 4:52
I mean, states may look at their job growth stats when voting on whether to raise the minimum wage, so we don't know which happened first in these cases.
...
written by Gene, July 02, 2014 7:54
For more fun, I just did the numbers for the bottom 4--NJ, Conn, VT, and New York. Again, using the Customized Data Base at BLS and drilling down to "Accommodation and Food Service" employment.

NJ: -1.14% (overall job growth -.56%)
Conn: +1.37% (overall job growth .11%
VT: +.97% (overall job growth +.35%)
New York: +1.11% (overall job growth +.54%)

With the exception of NJ, job growth in the "Accommodation and Food Service" sector (presumably low wage to min wage jobs) outperformed the overall job creation numbers in those states that had low rates to start with.

(I used BLS data for States. Took the average of the last 5 months or 2013 and first 5 months of 2014, found the difference and divided by the average of last 5 months of 2013 to get the percentage change)
Response to Chicken or Egg
written by Dustin Dawind, July 05, 2014 5:47
But 9 of the 13 states had a wage increase based on an automatic adjustment for inflation. So doesn't that kind of negate that issue in those states?
Citizens' Dividend Obviates Minimum Wage
written by Jeff Smith, July 09, 2014 10:38
Other companies will raise their prices to pass on the fatter paychecks and get away with it. However, their customers in their own businesses could decide to raise their prices, too. Cities and states with the highest wages do also have the highest prices and likely the fastest inflation (the government website is down as I write this).

The places with high or rising employment rates tend to be popular places, destination states, where economies are growing any way. In those places, government collects more taxes and can hire more bureaucrats. Public employment can account for a hunk of the job growth, too.

Finally, while many of us are happy to use the club of government to impose our will on business, business is just as happy to use that same club to get its way, too. It’s a win/lose battle, with business winning most of the time — look at corporate welfare — and the public losing most of the time — the minimum wage is not even livable!

Even if the minimum wage were livable, it would still only apply to entry level workers (who should be working their way up rather than trying to live off doing menial tasks). A minimum would not, obviously, pay the unemployed or the sick or the aged. To get money to them, it can’t be in the form of a wage at any level.

Actually, it’s not only the jobless who need an income apart from their labor; the hired need one, too. Everyone needs one. When people get such a cushion, then they can negotiate higher wages, and laws for minimum wages become absolutely obsolete.

More important for human health and happiness, an income apart from labor is the only way to shrink the workweek, expand leisure, and free people to find the purpose in existence.

And it’s not like the money for sharing does not exist. Indeed, the common wealth is huge. Huge and invisible. It’s the worth of Earth, Earth being something all of us need and none of us made, and land value being something an owner does not create but community at large does. Our spending for locations and resources is a huge spending stream just awaiting our sharing, a task ideally suited to a combination of land dues (or taxes) and rent dividends, a combination that would obviate minimum wages and the arguing over them. More at Progress.org.
...
written by Dr. T, July 10, 2014 9:59
RE: Jeff Smith's "an income apart from labor is the only way to shrink the workweek..." - So Progress.org is now advocating that every man, woman, & child get a base salary for just breathing? And that would be paid for Hillary, Obama, and the rest of the "One Percenters"?
...
written by ben, July 11, 2014 5:36
Hey, Dr. T ...so, you puck out and misinterpret one line from that post? Shame on you. And, odd to think you are suggesting people should not be interested in having leisure time, or worse that any amount of leisure time equates to somehow taking from others. Who is subsidizing your time to comment here?

I'm pro-business, pro-innovation, pro-America, and think a certain disparity of wealth is a healthy characteristic of an economy. To achieve the optimal version of an economy creating the maximum wealth, it is necessary to first understand that maximum wealth is not reflected by those at the top having achieved a higher peak. No, those peaks of wealth, like mountain peaks, rely on the baseline. When a minimum wage is a living wage (as in the 50s-60s) then overall wealth is increased through increased commerce, economic activity, and innovation to create new and interesting products for this wider base of consumers. One way to look at it requires dispensing with "trickle-down" and think about it like lifting up. I think many have forgotten that the opportunities to create a business to compete with other businesses in order to have a chance to create new wealth is predicated by the assumption there are customers with income to spend - yes, even on leisure. A living wage is the best route to new innovation and business growth. Indeed, it tends to make our streets safer, our schools better, and our innovation more impressive. If it means returning to a tax system which allocates responsibilities more effectively and say, going back to insurance companies being non-profit institutions (today they can take profits, giving incentives to deny coverage and extract more from the system to redistribute to profit driven investors who could use any number of other investment vehicles) and, shocking as it may sound, return to a more Eisenhower era republican model ...then I say we should do it.

Right now we see attempts to rectify the situation. (Hell, inflation adjusted, minimum wage from the '60s would be something north of $16/hr in today's dollars).

So, go ahead ...I've said my bit. Feel free to pick out a line, misrepresent it and misinterpret it so you can make some global statement which, on the face, appears to undermine me entirely but really only serves to reveal your partisanship.

Write comment

(Only one link allowed per comment)

This content has been locked. You can no longer post any comments.

busy
 

CEPR.net
Support this blog, donate
Combined Federal Campaign #79613
budget economy education employment Haiti health care housing inequality jobs labor labor market minimum wage paid family leave poverty recession retirement Social Security taxes unemployment unions wages Wall Street women workers working class

+ All tags