Thursday, January 28, 2021

There is a clear preponderance of negative estimates in the literature

High minimum wage and universal basic income are two policy approaches which are popular on the left, contradict widely accepted economic theory, have occasional natural experiments in states or among OECD countries and are widely studied but with non-consensus results.

No matter where you stand on either policy, you can always find a study that supports your position.  There are many field like this.  However, when you dig into them, you frequently find that the studies are plagued by multiple issues such as low or non-random population samples, non-independence, absence of rigorous methodology, p-hacking, etc.  

If you are an empirical rationalist, the volume of cognitive pollution is frustrating that those involved in the field cannot arrive at a consensus conclusion based on voluminous research.  

Perhaps there is a change in the offing though.  From Myth or Measurement: What Does the New Minimum Wage Research Say about Minimum Wages and Job Loss in the United States? by David Neumark & Peter Shirley.

The disagreement among studies of the employment effects of minimum wages in the United States is well known. What is less well known, and more puzzling, is the absence of agreement on what the research literature says – that is, how economists even summarize the body of evidence on the employment effects of minimum wages. Summaries range from “it is now well-established that higher minimum wages do not reduce employment,” to “the evidence is very mixed with effects centered on zero so there is no basis for a strong conclusion one way or the other,” to “most evidence points to adverse employment effects.” We explore the question of what conclusions can be drawn from the literature, focusing on the evidence using subnational minimum wage variation within the United States that has dominated the research landscape since the early 1990s. To accomplish this, we assembled the entire set of published studies in this literature and identified the core estimates that support the conclusions from each study, in most cases relying on responses from the researchers who wrote these papers.

Our key conclusions are: (i) there is a clear preponderance of negative estimates in the literature; (ii) this evidence is stronger for teens and young adults as well as the less-educated; (iii) the evidence from studies of directly-affected workers points even more strongly to negative employment effects; and (iv) the evidence from studies of low-wage industries is less one-sided.

That accords with my research over the years but it is nice to have it from specialists in the field spending dedicated time in pursuit of the answer.   


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