$1 Increase In Minimum Wage Would Cost Thousands Of Jobs

A $1 increase in the federal minimum wage could cost the national economy tens of thousands of jobs, according to a new study by economists Grace Lordan of the London School of Economics and David Neumark of the University of California, Irvine.

The economists sourced through 35 years of data and found that increasing the minimum wage incentivizes firms to automate low-skilled labor–the very individuals who would stand to benefit the most from even marginal increases in compensation. The pair focused on workers with only a high school degree, as this group is largely the target of minimum wage laws.

Lordan and Neumark used data from 1980-2015, which only shows an increase of the minimum wage from $6.77 to $7.77. The findings could have some insights into the current labor market, especially given the recent “Fight for $15” campaigns going on around the U.S.

Seattle notably pushed for a $15-an-hour minimum wage in 2012 and now some 18 percent of the U.S. workforce lives in a city or state that has approved such a wage increase. If the economist’s findings are accurate and a $1 increase really does cause tens of thousands of low-skilled workers to lose their jobs to automation, then raising the minimum wage to $15 could have some rather drastic consequences for the American labor force.

Not all economists agree with Lordan and Neumark. Economists Jonathan Meer and Jeremy West released a report in which they found that raising the minimum wage does not lead to a reduction in the level of unemployment, but rather leads to a slower rate of job creation. Meer and West did find younger and less educated workers suffer most from the slow rate of job creation.