Misleading the Public on the Minimum Wage

Don’t buy the argument that a higher minimum wage enhances job creation.

The President is using misleading data to argue in favor of raising the minimum wage, according to economics professor Donald Boudreaux and graduate student Liya Palagasvili of George Mason University.

Data from the Labor Department indicates that the 13 states that raised their minimum wages in January 2014 are seeing faster job growth than the rest of the nation. The President has used this information to argue that raising the minimum wage improves workers’ job opportunities, but that is not the case. When the prices of goods rise, people are less willing to make purchases. The same rule works for labor, write Boudreaux and Palagasvili: When the cost of labor is forced up, employers will hire fewer employees.

They explain why the Labor Department data is misleading:

– On average, employment in the 13 states that raised their minimum wages in January 2014 was 0.85 percent higher in June 2014 than it was in December 2013.
– During that same period, employment in the other 37 states rose 0.61 percent.
– However, shortening that time span by one month (from January 2014 to June 2014) changes the results: employment in the 13 minimum-wage states rose by only 0.59 percent, while employment in the other 37 states rose by 0.69 percent.

Thus, from January 2014 to June 2014, job growth in the states that raised their minimum wages in January was actually slower than the states that did not raise their minimum wages.

This is an example, write Boudreaux and Palagasvili, of how easily statistics can be manipulated. Comparing employment growth from January to June is not evidence that the minimum wage reduces job growth, they say, just as the President’s comparison of growth from December to June is not evidence that the minimum wage creates growth.

More From NCPA: