Liberal firebrand Paul Krugman backs President Obama’s plan for a phased-in 25 percent increase in the minimum wage, to $9 per hour. But he is still economist enough to note that raising it to $20 “would create a lot of problems” — among them, presumably, pricing low-skilled workers out of the job market.
There must be some level beyond which the minimum wage does more harm than good, and no one really denies it. Studies showing that higher minimum wages have little or no impact on employment generally refer to modest increments, or, as the White House’s own fact sheet puts it, “the kind of minimum wage increases we have seen in the United States.”
So the issue before us is whether Obama can hit the sweet spot: all higher-income upside for the working poor, and no job-killing downside.
I’m skeptical. Economists David Neumark of the University of California at Irvine and William Wascher of the Federal Reserve have spent their careers studying minimum wages. They found that, by and large, they reduce employment of young, low-skilled people. The last time the minimum wage was increased, in July 2009, Neumark estimated a loss of 300,000 jobs.