New Study Suggests Minimum Wage Increases Have Small Effect on Blue-Collar Jobs

Marshall/Rex Shutterstock via ZUMA

The minimum wage debate has settled into a dreary format: you can pretty much guess what a paper concludes just by reading the author’s name on the title page. The latest entry is from Grace Lordan and David Neumark, and since Neumark has never met a minimum wage he liked, it’s a pretty good guess that his latest paper describes job losses from increases in the minimum wage. Sure enough, it does.

That doesn’t mean he’s wrong, though, and the issue described in the paper is a real one: a higher minimum wage increases the financial motivation to automate jobs. Lordan and Neumark focus on workers with only a high school education working at “automatable tasks.” Here’s the basic result:

In the aggregate across all industries, as indicated in column (1), we find that minimum wage increases cause a statistically significant reallocation of labour away from automatable tasks. We find that a $1 increase in the minimum wage leads to a 0.43 percentage point decrease in the share of automatable jobs done by low-skilled workers.

If I’m reading Table 1 correctly, “automatable” tasks make up 30 percent of the total. This means that among all blue-collar workers, a $1 increase in the minimum wage leads to a 0.13 percentage point decrease in total employment. However, the authors also report that only 12 percent of these workers become unemployed (the rest move into other jobs). That implies a 0.016 percentage point decrease in actual employment

Nationwide, the unemployment rate is 4.5 percent among workers with only a high school degree. Raising the minimum wage by a whopping $6 would increase that to 4.6 percent.¹ This is probably why the authors focus less on unemployment and more on how minimum wage increases could lead to job changes:

Our work suggests that sharp minimum wage increases in the United States in coming years will shape the types of jobs held by low-skilled workers, and create employment challenges for some of them….Given data limitations, we cannot address the permanence of the effects.

The effects they find are higher for some groups than others (old and young vs. middle aged), and higher in some industries than others (manufacturing vs. transportation). And the reallocation of labor is likely to increase in the future as automation becomes more and more capable. At the moment, however, the effect is pretty small.

¹This actually seems surprisingly low to me. I would have expected a bigger effect. Perhaps it’s because industries with lots of automatable jobs (manufacturing, for example) already pay more than the minimum wage, while industries that actually depend on minimum wage labor (housecleaning and fast food) aren’t easily automatable.

One More Thing

And it's a big one. Mother Jones is launching a new Corruption Project to do deep, time-intensive reporting on the corruption that is both the cause and result of the crisis in our democracy.

The more we thought about how Mother Jones can have the most impact right now, the more we realized that so many stories come down to corruption: People with wealth and power putting their interests first—and often getting away with it.

Our goal is to understand how we got here and how we might get out. We're aiming to create a reporting position dedicated to uncovering corruption, build a team, and let them investigate for a year—publishing our stories in a concerted window: a special issue of our magazine, video and podcast series, and a dedicated online portal so they don't get lost in the daily deluge of headlines and breaking news.

We want to go all in, and we've got seed funding to get started—but we're looking to raise $500,000 in donations this spring so we can go even bigger. You can read about why we think this project is what the moment demands and what we hope to accomplish—and if you like how it sounds, please help us go big with a tax-deductible donation today.

We Recommend

Latest

Sign up for our newsletters

Subscribe and we'll send Mother Jones straight to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate