An obvious problem in DC is that when it comes to a variety of issues, it can be hard to find objective evidence. Especially around the minimum wage, organizations with vested interests bang out “analyses” whose results you could precisely predict simply by knowing who they represent.
You might think that CBO plays this objective arbiter role, and in many ways they do, but while their minimum wage analysis was certainly in the objective ballpark, they quite clearly underweighted newer, high-quality literature that showed smaller employment impacts than they ultimately reported (even so, CBO found that 98 percent of affected workers benefited from the increase).
So it was with some interest that I perused a research note from Goldman Sachs researchers on the minimum wage (no link). These economists do excellent, highly objective research on every issue that might affect markets and the economy, typically looking for impacts on growth, jobs, inflation, interest rates, and so on. They also tend to be very up-to-date on the most relevant findings in these areas.
Here’s what they found on the minimum wage.
Economists are split on the question of whether a minimum wage hike would reduce employment. In our view, the CBO’s recent estimate of a 500k hit to the level of employment (0.3%) is likely a bit toward the upper end of reasonable estimates, both because many studies find no significant impact of minimum wage hikes on employment and because the offsetting boost to demand is likely to be larger than usual at present. Any impact on the monthly payroll numbers would likely be small relative to normal volatility and would likely be concentrated in the retail trade and leisure/hospitality sectors.
A minimum wage hike might also boost inflation, but probably only very modestly. Hikes since 1990 have not been associated with discernibly higher inflation, and even if all employment cost increases were passed on to consumers, the resulting increase would probably not boost inflation by more than 0.1pp per year.
They also included a useful, though somewhat hard to read for at least my aged eyes (click on it for a better view), table of the relevant lit on employment effects (see below). Therein, you’ll see a lot of “small negatives,” a few “small positives,” and a bunch of “insignficiants.” The title of the table—Economic Research on Minimum Wage Hikes has Found a Small Effect to No Effect on Employment—is the relevant punchline.
If facts mattered right now, debates like this one would benefit greatly from this type of objective input.