Minimum Wage in The United States - Economists' Analysis

Economists' Analysis

According to a paper by Fuller and Geide-Stevenson, 45.6% of American economists in the year 2000 agreed that a minimum wage increases unemployment among unskilled and young workers, while 27.9% agree with this statement but with provisos. As a policy question in 2006, the minimum wage has—to some extent—split the economics profession with just under half believing it should be eliminated and a slightly smaller percentage believing it should be increased, leaving few in the middle.

Some idea of the empirical problems of this debate can be seen by looking at recent trends in the United States. The minimum wage fell about 29% in real terms between 1979 and 2003. For the median worker, real hourly earnings have increased since 1979; however, for the lowest deciles, there have been significant decreases in the real wage without much decrease in the rate of unemployment. Some argue that a declining minimum wage might reduce youth unemployment (since these workers are likely to have fewer skills than older workers). Furthermore, some economics research has shown that restaurant prices rise in response to minimum wage increases.

Overall, there is no consensus between economists about the effects of minimum wages on youth employment, although empirical evidence suggests that this group is most vulnerable to high minimum wages.