The new analysis of minimum wage growth in Minneapolis and St. Paul is misleading and flawed and should be ignored
This week, researchers from the Federal Reserve Bank of Minneapolis released two analyze Several economic impacts recent Increase In Minneapolis and St. Paul’s separate city-wide minimum wages. The authors of these two independent but interrelated analyses interpreted their findings as showing that a series of increases in the minimum wage reduced employment in the twin cities, but even the results in their own reports do not support this conclusion.
The data and methods used in the study are simply not enough to distinguish the effects of minimum wage growth from the effects of other employment changes that occur almost simultaneously. More problematic is that these studies failed to successfully estimate the impact to 2020, when the method of the study was unable to distinguish the impact of the minimum wage from the devastating impact of the pandemic on the service labor force in the two cities. In fact, the results of the research show incredibly All The reason for the decline in restaurant employment during the pandemic is the increase in the minimum wage, not the lockdown, curfews, and the decline in pandemic-related consumer spending on dining out.
The first methodological issue is that the study chooses a comparison group to evaluate the impact of Minneapolis and St. Paul. To determine the impact of the minimum wage increase, the study compared the actual results in the two cities with other Minnesota cities that had similar wage and employment growth trends before the minimum wage increase. These other cities in Minnesota form a “control” group, or the opposite of the wage and employment situation in Minneapolis and St. Paul without raising the minimum wage.
Although this method is a reasonable starting point in principle, there are several indications that even before the pandemic period, the method failed to produce a reasonable estimate in this situation.It is worth noting that the methods of these studies failed in their own two “placebo” tests and found that the “impact” of the minimum wage should obviously not exist—For example, by predicting changes in employment years before the implementation of the minimum wage.
The method used in the study shows that the increase in the minimum wage in 2018-2019 led to huge changes in employment in low-wage sectors in 2014 and 2015, and that three to four years forward The increase in the minimum wage has actually taken effect (see Table 7 of the two studies). An effective method would predict zero impact so far before actual growth.
Their method also estimates that the 2018-2019 minimum wage change in Minneapolis increased employment in the finance and insurance industries by 17%, although this higher-paying industry does not appear to be affected by the minimum wage.
In addition, these studies mistakenly attribute the large fluctuations in employment to the two-year minimum wage in São Paulo. forward The law requires employers to raise wages. Although the authors describe these results as “expected” effects, we found this to be unreliable because the turnover rate of low-paying jobs is usually high, allowing employers to make adjustments quickly and easily. For example, the “impact” found years before the actual minimum wage change is often used as a fake or placebo test for other minimum wages. ResearchIn addition, these estimated patterns are unstable: wages for accommodation and food services have increased slightly, while the number of employed people has decreased significantly; wages in the retail industry have increased slightly, but employment has not changed; and “other services” have no wage growth and large employment growth.
Extensive survey results indicate that no matter how the minimum wage changes, the method of the study tends to estimate large fluctuations in employment. All of these results do not reflect the actual consequences of the minimum wage, but indicate that the methods of these studies have not succeeded in distinguishing the actual impact of the minimum wage from other unrelated employment changes that occurred at about the same time.
These studies did not only focus on 2018 and 2019 before the pandemic, but tried to extend their analysis to 2020. This part of the analysis relies on the heroic hypothesis that in the absence of any minimum wage increase, Minneapolis or St. Paul will follow the same rules in their respective comparison cities in Minnesota during a period marked by pandemics and racial justice protests. The same trajectory experienced before these events.
The magnitude and timing of the employment impact in the paper indicate that this assumption is wrong.For example, the author estimates that the minimum wage in Minneapolis has reduced restaurant employment by more than 40%, much more than Actual drop of 30% From 2017 to 2020, the number of restaurant jobs in Hennepin County (including Minneapolis) increased. In other words, the study shows that if the minimum wage is not raised, the number of restaurant employment in Minneapolis will increase by about 10% during the pandemic and during the epidemic. Given that three-quarters of the full-service restaurant job losses attributed to the Minneapolis minimum wage by the study happened to occur during the 2020 pandemic and racial justice protests, and Minneapolis’s lowest The salary increase was only $0.75, so these results are even more incredible for small employers and $1.00 for large employers.
In general, the restaurant employment response estimated by the research is incredibly large, far beyond the scope of existing minimum wage research. For example, the expected impact by 2020 is consistent with the unemployment of every minimum wage worker in a full-service restaurant.
However, other studies have found that the minimum wage has a much smaller impact on restaurants.Comprehensive estimated median Review Arindrajit Dube’s research shows that job losses are two orders of magnitude less than the full-service restaurant research estimates.Use the Congressional Budget Office’s method, which has criticize Being too pessimistic, the wage increase estimated by the Minneapolis study means that the employment rate of full-service restaurants in Minneapolis should have fallen by only 2%. In contrast, the study estimates a decline of more than 12% in 2019 and more than 40% in 2020.
The unstable, large, and often counter-intuitive results of these two studies clearly show that neither of these studies is a reliable guide to the impact of the recent twin-cities minimum wage increase.