Who was it who coined the immortal observation that “It ain’t what we don’t know that hurts us–it’s what we know that just ain’t so”?
I thought about that when I read a recent report about job creation experience in states that had recently raised their minimum wage.
Economists at Goldman Sachs conducted a simple evaluation of the impact of these state minimum-wage increases. The researchers compared employment changes between December and January in the 13 states where the minimum wage increased with the changes in the remainder of the states, and 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.
It has always seemed reasonable to assume that higher wages would depress job creation. What that simple logic missed, however, were the many factors other than wage rates that influence the decision whether to add employees. The cited study joins an overwhelming body of evidence that the simple equation is wrong.
It’s another one of those things we know that just ain’t so.