Until the mid-1990s, labor economists had a consensus that a 10 percent increase in the minimum wage reduced employment of impacted groups (like teenagers) by about 2 percent.
[30] Research by David Card of the University of California-Berkeley challenged this conclusion.
[31] His research, focusing on case studies of states that raised the minimum wage and states that did not, concluded the minimum wage had no adverse effect on employment. This spurred an explosion of research on the topic. This research coincided with a significant number of states raising their minimum wages above the federal level in the 1990s and 2000s. These state increases created far more case studies for economists to analyze and permitted panel studies utilizing variation in minimum wage rates across all U.S. states.
Two-thirds of the studies in this “new minimum wage research” utilizing state variation in minimum wages came to the same conclusion that previous economists had: higher minimum wages reduce the employment of less-skilled workers.[32] Among the most methodologically rigorous studies, 85 percent came to this conclusion.
A recent line of papers by Michael Reich, Arindrajit Dube, and Sylvia Allegretto contest these findings.
[33] They argue that states that raised their minimum wage above the federal level (typically in the Northeast and West Coast) have slower underlying employment growth than states that did not raise their minimum wage (typically in the South and Mountain West). They contend that studies finding negative employment effects conflate these pre-existing trends with the effects of higher minimum wages. They find that once researchers control for state or regional trends the negative relationship goes away. They then compared counties that border each other across a state line and concluded higher minimum wages have negligible employment effects on teenagers and restaurant employees.
David Neumark of the University of California–Irvine and William Wascher of the Federal Reserve Board strongly dispute this critique.
[34] They show that the evidence for pre-existing trends biasing previous studies is weak. They demonstrate that it takes very specific controls to make the relationship between the minimum wage and job losses disappear. Using more general specifications favored by economists produces the standard conclusion that
minimum wage increases cost jobs.