Republicans have argued that raising the minimum wage will hurt employment, but the data suggest there’s little connection between the two.
Democrats are making a midterm election year push to raise the federal minimum wage to $10.10 an hour—Iowa Sen. Tom Harkin (D) is pushing a bill that would do just that, and President Obama has said he supports the measure. A majority of Americans do too, according to a Washington Post-ABC News poll. But Republicans argue that raising the minimum wage will stifle economic growth.
“When you raise the price of employment, guess what happens? You get less of it,” House Speaker John Boehner said at a news conference last February.
But the data show little, if any, tie between the minimum wage and the unemployment rate. In the charts below, we overlay state minimum wage data from the Department of Labor (blue lines) with state unemployment data from the Bureau of Labor Statistics (red lines) and the national unemployment rate (green lines). What you see in each case is a state unemployment rate that closely tracks the national rate – despite fluctuating minimum wages.
Another argument is that the cost of paying higher wages is passed on to consumers. That, at least in the fast food industry, is unproven. A study on this effect conducted in the mid-’90s concluded that there is “mixed evidence that higher minimum wages result in higher fast food prices.”
Take Big Macs, for example. In the small city of Liberty Lake, Wash., the sole McDonald’s restaurant sells a Big Mac Value Meal for $6.09 before taxes. Six miles up Interstate 90, in Post Falls, Ida., the same value meal costs the same $6.09 pre-tax.
Washington state’s minimum wage is $9.32 an hour; Idaho’s is set at $7.25 an hour. It’s unclear how many of those two restaurants’s employees earn the minimum wage. The owners did not respond to multiple inquires from The Washington Post.