How does a decrease in minimum wage affect unemployment?

Raising the minimum wage carries the risk of increasing unemployment, depending on the increase in the wage. The thinking process consists of increasing the. The arguments, pros and cons · How much is the minimum wage. The thought process is that raising the minimum wage would increase costs for companies, causing them to hire fewer workers.

In this environment, the minimum wage is more important than ever, since a weaker labor market is unlikely to provide low-wage workers with the bargaining power needed to negotiate fair wages for their work. The minimum wage rose 40 cents in January 2003 as a result of the initiative, but more importantly, Oregon followed Washington's example by enacting periodic annual increases linked to the rate of inflation. It is very difficult to blame the minimum wage for the difficulties of that year, because this meteoric rise in unemployment not only coincided with the start of the national recession, but it also began at a time when the state minimum wage had not changed in two years (figure. Opponents of minimum wage increases often comment that the use of “payroll records” in the Neumark and Wascher study is superior to that in the Card-Krueger telephone survey.

While Bill Clinton was in office, there were also periods when unemployment rates fell as the minimum wage increased. The best data for analyzing the impact of the minimum wage on employment in restaurants is data from the ES-202, which state governments routinely collect for the unemployment compensation program. The timing of the minimum wage increases temporarily coincided with a slowdown in employment growth in Oregon, but that doesn't mean that the minimum wage was the cause of this slowdown. For this reason, the proportion of the labor force that earns at least the current minimum wage, but less than 120% of the minimum wage, is used as a measure of how high the minimum wage is in each state.

Clearly, the main causes of the loss of jobs in Washington have been more powerful forces, such as trade imbalances, the overvaluation of the dollar, the national recession, the Asian financial crisis and a terrorist attack that profoundly affected the aerospace industry. Job growth in Oregon during this period simply followed the same trend as many other western states, demonstrating a strong regional trend that had nothing to do with Oregon's minimum wage. In addition, the industries most affected by the slowdown in employment growth in Oregon were not the industries that would likely be heavily affected by the increase in the minimum wage. Clemens explores the non-wage aspects of a job (health insurance, working conditions, flexible schedules, and production technology) that a company could adjust in response to the higher costs caused by an increase in the minimum wage.

Clemens also cites a study that argues that minimum wage increases can be regressive because a large proportion of the budgets of low-income households go to products and services manufactured by minimum wage workers, such as restaurants. In addition to what legislators are doing, some large employers have set out to establish minimum wages for the entire company in recent years. The question of whether moderate increases in the minimum wage have a negligible positive or negative impact on certain segments of the labor market will continue to be a fruitful job for economists. As you can see in the scatter charts, there seems to be no correlation when adjusting the minimum wage to account for inflation, and a very small or zero correlation when inflation isn't part of the equation.