Factual Reality: Increases In Minimum Wage Do Not Increase Unemployment
I recently encountered a libertarian online who was peddling a slew Reason-dot-com and Mises-dot-org articles to prove the proposition: ‘when minimum wage is increased, unemployment will go up.’ We’ve all heard this one a million times before. But what puzzled me was the prescriptive nature of all these articles. They simply claim this relationship is necessarily the case, like some immutable physical law. Minimum wage goes up; unemployment goes up. The sun always rises in the east.
This position puzzles me because a ‘minimum wage’ is not some new economic idea that doesn’t have a historical track record, like, for instance, a ‘Universal Basic Income’ (which is the idea that everyone should be given no-strings-attached cash to have a minimally decent-and-normal human life by the standards of the day, even if their jobs have been eliminated by macroeconomic gains in mechanical and logistical efficiency). No: ‘minimum wage’ has been around for nearly eighty (80) years! Do we then really need, at this late historical hour, yet more prescriptive inferences of what ‘will happen’ if we raise it? Or can we just look at what actually does happen in factual reality?
Turns out what happens when minimum wage is increased in factual reality is pretty easy to find. To begin, I looked up the years in which the Federal minimum wage was first established and later raised at the Department of Labor’s website. These years are: 1938 (first established), 1939, 1945, 1950, 1956, 1961, 1963, 1967, 1968, 1974, 1975, 1976, 1978, 1979, 1980, 1981, 1990, 1991, 1996, 1997, 2007, 2008, and 2009.
Then I looked up the unemployment rates in (i) the years in which minimum wage was increased and (ii) the years prior to those increases (when the minimum wage was lower), through the Census Bureau and the Bureau of Labor Statistics. If, in factual reality (and not in prescriptive, inferential, theoretical right-wing think-tank fantasy-land where Lord Ludwig von Mises sits upon the Iron Throne), increases of the minimum wage bear a clear, direct, and unavoidable causal relationship to increased unemployment, it then follows we should see an increase in unemployment in the wake of every single increase in the minimum wage. If we don’t, it means either minimum wage increases are (i) not related to employment figures at all, or (ii) have too weak an effect to overpower other economic variables, like capitalism’s predictably harmful boom-and-bust cycles, historical events, etc., in which case we shouldn’t pay the weak effect too much mind when making real human beings’ lives better with stronger wages.
So I sat here on my Saturday with the sun shining outside and voluntarily looked at tables, numbers, and percentages for our mutual benefit, so that we together can put this Chimera to sleep once and for all. I created the chart at the bottom of this article which demonstrates that no causal relationship exists between minimum wage increases and unemployment. Sometimes when the minimum wage goes up, unemployment goes up. Sometimes unemployment stays exactly the same. And sometimes unemployment goes down after minimum wage is increased.
In any event, these factors are not related in any way near the extent that those on the political Right try to have us believe. If minimum wage increases were in fact inextricably tied to increased unemployment, we should see a consistent drop in national employment every single time national minimum wages were was raised. We clearly, certainly, most definitely don’t. I see, in factual reality, no clear, direct, and unavoidable causal relationship between the two factors based on what actually happened in actual historical reality upon looking at the actual numbers. Do you? This Chimera conjured by the Right needs the pentobarbital needle post-haste.
The libertarians can show us as many Reason-dot-com and Mises-dot-org articles making the religious claim that increased minimum wages cause higher unemployment as they want. Like religion, this position is a silly article of faith not born out by factual reality. Below, you can view the chart demonstrating the actual history of minimum wage increases and unemployment rates. I will finish with a quote by billionaire venture capitalist and businessman Nick Hanauer, a much smarter person than me, on this very topic:
“To understand how wage suppression works, it’s important to understand . . . the idea that drives that, [which] is this incredible, insidious, repeated thing, which is [the idea that] if wages go up, employment goes down. . . . It has been repeated endlessly in our country. And the facts are there is no evidence for this whatsoever. But if you can get the broad public to believe that if wages go up, employment will go down, you get forty years of wage suppression. . . . In fact, the fundamental dynamic in a capitalist economy is that when workers have more money, businesses have more customers and hire more workers.”