Solvency – Employment

Levitz 23 [Eric Levitz; Eric Levitz is a features writer for Intelligencer. He covers politics and economics; 5/13/23; “New Study Finds a High Minimum Wage Creates Jobs”; https://nymag.com/intelligencer/2023/05/new-study-finds-a-high-minimum-wage-creates-jobs.html]

In fact, not only did these historically large minimum wage hikes fail to put all fast food workers out of job, but a new study indicates that they actually induced job growth. In “High Minimum Wages and the Monopsony Puzzle,” a team of economists at the University of California, Berkeley examined 47 large U.S. counties where the minimum wage had reached $15 an hour by the first quarter of 2021, and compared their wage levels and employment figures to those of similar counties that hadn’t raised the minimum wage since 2009. They focused specifically on fast-food workers, so as to avoid the complexities introduced by the tipped-wages common among servers at more upscale restaurants. Their results will shock Saltsman and his ideological sympathizers. First, raising the minimum wage successfully increased hourly pay for workers in the bottom 10 percent of the income distribution without reducing wages for those in the middle. Had New York and California failed to pass minimum wage increases, this narrowing of the gap between the bottom and middle rungs of the income ladder would not have occurred. Second, the implications for employment were very slightly positive: Counties that enacted minimum wages saw more job growth, not less. Now, a conservative economist might counter that one reason why these minimum wage hikes didn’t increase unemployment is that New York City, San Francisco, and Los Angeles already had fairly high market wages, and saw considerable “natural” wage growth over this period. If researchers had focused narrowly on the impact of state-level minimum-wage hikes on relatively low-wage counties in upstate New York or inland California, they probably would have discovered substantial employment effects. Happily, the Berkeley economists thought of this. To correct for the possibilities 1) that high-wage cities are disproportionately likely to enact large minimum wage increases and 2) that high market wages attenuate the employment implications of high minimum wages, they isolated the impact of state-level minimum wages on counties that had neither enacted local minimum wage increases nor enjoyed above-average market wages. When they narrowed their lens, the researchers did in fact find that the employment impacts of minimum wage hikes became more profound: Rather than producing a slight increase in job growth, high minimum wages were associated with substantial increases in employment.

Minimum wage decreases employment flows---unstable employment is an alt cause to the aff

Sylvia Allegretto et al 13 (Sylvia Allegretto, IRLE, University of California, Berkeley, Arindrajit Dube, University of Massachusetts Amherst, and IZA Michael Reich, IRLE, University of California, Berkeley, Ben Zipperer, University of Massachusetts Amherst), “Credible Research Designs for Minimum Wage Studies,” September 2013, Institute for the Study of Labor (IZA), https://docs.iza.org/dp7638.pdf

The QWI dataset allows us to examine also minimum wage effects on employment flows, specifically hires and separations. To explain the lack of employment effects, Card and Krueger (1995) present a dynamic monopsony model, in which minimum wage increases reduce recruitment and retention costs. As Card and Krueger comment, these costs can be substantial because low-wage sectors have high turnover rates. For example, according to QWI data, the quarterly turnover rate for restaurants in our border county sample was 42 percent. More recently, Manning (2003) developed a more formal version of this model, based on Burdett and Mortensen (1998), and a 2010 symposium in the Journal of Labor Economics presented a series of empirical studies that assessed the dynamic monopsony model by estimating firm-level separations elasticities (Ashenfelter et al. 2010). However, none of these studies directly test the effects of minimum wages on market-level employment flows with representative data.17

Columns 4 and 8 in Table 3 report our results for labor market flows. The upper panel presents our results for teens and the lower panel presents our results for restaurant workers. In the case of teens, the canonical model specification—column 4—shows large and statistically significant negative effects on hires and separations. In our local specification with county-pair specific time effects—column 8—the magnitude of the hires and separations elasticities are smaller, but they remain substantial at -0.22 and -0.23, respectively; and these estimates are statistically significant. In the case of restaurant workers, the results for each specification are very similar to those for teens; and in our preferred specification (column 8, panel B) the hires and separation elasticities are -0.26 and -0.23, respectively.

In contrast to the results for employment stocks, we find strong reductions in both separations and hires. Along with the strong earnings impact, these results contradict the claim in Neumark, Salas, and Wascher (2013a) that our spatial controls discard too much variation to find any significant effects. Dube, Lester and Reich (2013) also show that these results— a substantial positive wage effect, a small effect on employment stock, and a substantial negative effect on employment flows—can be explained using models with search friction.18