Speaker Oliver Misuses Minimum Wage Study
New Jersey Minimum Wage Increase Would Lead to Lost Jobs, No Economic Boost
Publication Date: January 2012
Topics: Minimum Wage
Today, the Employment Policies Institute (EPI) denounced New Jersey Assembly Speaker Sheila Oliver’s (D-Essex) careless misuse of research in support of her proposal to raise the state minimum wage.
The speaker proposes to raise New Jersey’s minimum wage to $8.50 an hour and index it for inflation, arguing that it would be “economic stimulus” for the state. In support of that argument, she cites a Federal Reserve Bank of Chicago study.
Speaker Oliver is wrong. Nowhere does the Federal Reserve study describe minimum wage hikes as a job creation tool or as economic stimulus. In fact, the study’s author explicitly cite “compelling” evidence that minimum wage increases make it more difficult for less-experienced jobseekers such as young people to find employment.
In reality, the findings of the study Speaker Oliver misuses are quite modest. Following a minimum wage increase, the authors found a temporary boost in spending mostly caused by a small number of households purchasing vehicles (and going in to debt to do so). The authors found no statistical impact of wage hikes on the purchase of services and non-durable goods (such as groceries).
“Speaker Oliver has latched on to the talking points of advocacy groups without carefully reading the research for herself,” said Michael Saltsman, research fellow at EPI. “This study does not indicate that minimum wage hikes are an economic stimulus, and actually references possible unintended consequences of a higher minimum wage.”
“Recent research from West Point found no economic boost from past increases in the minimum wage,” Saltsman continued. “In fact, past wage hikes at the state and federal level have decreased output in certain industries with a larger concentration of low-wage employees.”
Saltsman concluded: “Especially in a struggling economy, the people of New Jersey deserve an honest accounting of the consequences of raising the minimum wage, and Speaker Oliver hasn’t given it to them.”