Employment and Higher Minimum Wage Essay

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-Editor's note: Michael Saltsman is the research fellow at the Employment Policies Institute in Washington, a nonprofit that studies public policy issues surrounding employment growth.
(CNN) -- The U.S. Census Bureau reported this week that more Americans are living in poverty than ever before measured -- 46.2 million people.
This news was followed by a predictable response from advocacy groups like the National Employment Law Project which suggested that an increase in the minimum wage could help lift Americans out of poverty. And not only that; in a CNN.com op-ed, a policy analyst with the group said that an increase in the minimum wage could boost the economy and create 160,000 jobs.
These claims may pass muster as applause lines at a political rally, but they can't pass the test of rigorous empirical research.
The intuitive thinking on raising the minimum wage is straightforward: Raising the lowest wage that employers can pay will boost the paychecks of the lowest-paid workers and help pull them out of poverty. This line of logic persuaded 28 states to raise their minimum wage above the federal level between 2003 and 2007.

Michael Saltsman
But research published last year in the Southern Economic Journal, a study funded in part by the Employment Policies Institute, found no evidence that these state minimum wage increases reduced poverty rates. The authors, from Cornell and American universities, suggested that some wage gains were flowing to higher-income families rather than the intended beneficiaries.
There's an even more important effect to account for: a decrease in employers' demand for the less-skilled and less-experienced. Those employees who receive a minimum wage increase may be better off, but those who lose their job because they're now more expensive to employ are most certainly worse off.
Research from economists David Neumark, Mark Schweitzer and William Wascher found a higher minimum wage results in a net increase in the proportion of families who are poor or near-poverty -- meaning that the "losers" from a minimum wage increase outnumber the "winners."
That's difficult for advocacy groups like NELP to grapple with, so they generally choose to ignore it. Instead, NELP's executive director dismisses basic economic concepts like supply and demand as "simplistic" and "18th century." In the CNN.com op-ed, the group's policy analyst directed readers to a handful of outlying studies -- in particular, a 1994 study on the minimum wage from economists David Card and Alan Krueger. (The latter was recently nominated to chair the President's Council of Economic Advisers).
Card and Krueger purportedly debunked the decades-long economic consensus that raising the minimum wage reduces employment, claiming that a 1992 minimum wage increase in New Jersey raised employment. To this day, the study is still showered with superlatives like "groundbreaking" by well-wishers at NELP.
But missing from that re-telling is the story's ending: Card and Krueger's headline-grabbing finding -- that raising the minimum wage had increased employment -- was discredited by another study that found serious problems with the quality of their data.
Key questions in the data collection process were so ambiguous that Card and Krueger reported some fast-food locations changing from zero full-time employees to 29 in less than a year; others reported a dramatic drop in part-time employees, from 60 people down to 15.
When actual payroll data was analyzed by economists Neumark and Wascher, the results flipped: far from boosting employment, the mandated wage increase in New Jersey had decreased employment -- just as standard economic theory would predict. That the New Jersey study was an outlier has become even more apparent in the years since: 85 percent of the most credible studies on the subject in the past two decades have pointed to job loss following an increase in the minimum wage.
So, where does that leave NELP and other
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