Washington Post Fact Checker Calls Out Obama’s “Minimum Wage Increase Doesn’t Cost Jobs” Claim

The Washington Post’s
Fact Checker called out President Obama for his recent
claim that there is “no solid evidence that a higher minimum wage
costs jobs.”  

Obama delivered the
questionable remarks at a
Center for American Progress-hosted event in the nation’s
capital on Wednesday. His speech touched on the importance of
upholding Social Security and Medicare entitlements, the insiduous
threat of growing inequality, the 1 percent, and minimum wage
increases. 

The president applauded both New Jersey’s
voter-approved minimum wage raise and the D.C. City Council’s

recently announced support for an increase in the city’s
minimum wage to $11.50/hour. He followed up with a
proclamation of his own support:

I agree with those voters, and I’m going to keep pushing until
we get a higher minimum wage for hard-working Americans across the
entire country.  It will be good for our economy. It will be
good for our families.  

He then assured the audience that enacting such a policy would
not result in the unintended consequences for the poor that they
might have heard about:

Now, we all know the arguments that have been used against a
higher minimum wage.  Some say it actually hurts low-wage
workers — businesses will be less likely to hire them.  But
there’s no solid evidence that a higher minimum wage costs jobs,
and research shows it raises incomes for low-wage workers and
boosts short-term economic growth.  

The Post Fact Checker, which is a non-partisan blog
checking politicians’ claims for accuracy, said they approached the
president’s statement with caution:

The Fact Checker generally hesitates to wade into messy economic
debates [since economists have a hard time reaching a
consensus]…But here’s the president of the United States,
essentially saying that the debate has been settled. Is that really
the case?

The Fact Checker’s conclusion? No,
it’s not really the case. 

The White House, in support of the president’s comment, pointed
to a section of the 2013 Economic Report of the President (pages
120-121). The report noted that most economists had once
believed an increase in the minimum wage would reduce employment
but that “the consensus view among economists has since
shifted as more evidence has accumulated.”  It also
cited a
2009 meta-analysis of 64 studies of the minimum wage that
found “no evidence of a meaningful adverse employment effect” of
the minimum wage.

The problem is that while there may be a new consensus emerging
on the left-leaning side of economic theory, there is an equally
fierce response from other economists.

In 2006, economists David Neumark and William Wascher
published a
survey of more than 100 studies, and came to an opposite
conclusion, directly contradicting the results of the so-called New
Minimum Wage Research. They found that the majority of the studies
showed that “raising the minimum wage leads to economic distortions
and often has unintended adverse consequences for the employment
opportunities of low-skilled workers.”

Economist Arindrajit Dube and others came up with a new
approach in 2010, looking at the impact in counties adjacent at
different states, that bolstered the findings of the new minimum
wage forces. But economists Jonathan Meer and Jeremy West this
yearfired
back with a study that found that minimum wage hikes
reduce net job growth because of the effect on expanding companies.
(In October, Dube responded that
their supposed job losses were occurring in the sectors without
minimum wage workers, which in turn prompted this
rebuttal by Meer and West.) And a 2011
study from economists at the London School of Economics
and the Central Bank of Turkey found higher minimum wages increased
unemployment.

In conclusion, the Fact Checker, said, “To flatly declare the
debate is over is misleading.  He did not quite say there was
no evidence–but he came close.” They awarded Obama two
“Pinocchios.”

The president also implied that higher wages wouldn’t result in
higher prices for consumers:

Others argue that if we raise the minimum wage, companies will
just pass those costs on to consumers. But a growing chorus of
businesses, small and large, argue differently. 

The Post did not tackle this claim, but it is also
dubious. At least one meta-analysis
on the price effects of the minimum wage found that a 10% minimum
wage increase in the US raises food prices by 4% and overall prices
by 0.4%. Other recent
research found that a 10% minimum wage increase raised prices
by .7%.

Obama’s remarks come in light of
fast food strikes for higher wages, multiple local and
state-wide minimum wage
increases across the country, and his own support for the
congressional Democrats’
proposal to raise the federal minimum wage to $10.10/hour and
peg it to inflation. 

Watch a Reason TV interview with a few of this week’s fast food
strikers in New York City: