We paraphrase Paulie's (The Pope of Greenwich Village
) definition of success to describe Jonathan Meer and Jeremy West's approach to statistical proof in Effects of the Minimum Wage on Employment Dynamics.
Not because they're New York hustlers, but because the two Aggies have some street smarts;
The voluminous literature on minimum wages oﬀers little consensus on the extent to which a wage ﬂoor impacts employment. For both theoretical and econometric reasons, we argue that the eﬀect of the minimum wage should be more apparent in new employment growth than in employment levels. In addition, we conduct a simulation showing that the common practice of including state-speciﬁc time trends will attenuate the measured eﬀects of the minimum wage on employment if the true eﬀect is in fact on the rate of job growth. Using three separate state panels of administrative employment data, we ﬁnd that the minimum wage reduces net job growth, primarily through its eﬀect on job creation by expanding establishments. These eﬀects are most pronounced for younger workers and in industries with a higher proportion of low-wage workers. [HSIB's bold, of course]
In other words, the infamous Card-Krueger approach--followed by a long line of Supply-Demand denialist
s--is the wrong place to be looking. Even if the light if better there
. As the wise guys from Texas put it;
...diﬀerence-in-diﬀerences identiﬁcation strategies [the denialists preferred approach] can...ﬁnd an eﬀect on the level of employment if there is a suﬃciently rapid drop in the number of jobs relative to the counterfactual. Given the small margin of net job expansion relative to total employment, this eﬀectively necessitates a (temporary) reduction in the absolute size of the labor force. However, if the minimum wage instead aﬀects the rate of net job growth, then it will take some time for the eﬀect to be reﬂected in the level of total employment to a degree which would be statistically detectable.
Which is why some economists can claim that there is no disemployment effect from raising minimum wages, while fooling themselves into believing their own sleight-of-stats. Again, they're looking in the wrong place.
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