Dec

2011 24

One million workers in eight states will see wage increases next year according to this morning’s New York Times:

The minimum wage increases in Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont and Washington will be 28 cents to 37 cents an hour, according to the National Employment Law Project. That is an extra $582 to $770 a year for a full-time minimum wage worker, and resets these states’ minimum wages to $7.64 to $9.04 an hour.

At that higher end is Washington State, which will become the first state in the nation to set its minimum wage above $9 an hour. For reference, the federal wage floor for most workers is $7.25 an hour.

About one million minimum-wage workers will be affected by increases in the eight states, according to the Economic Policy Institute, a liberal research organization. An additional 400,000 workers who make just above minimum wage will also most likely get a raise because many employers adjust their pay distribution for all employees when there is a new minimum.

As always, the forces interested in suppressing wages have spun this development as bad for business, suggesting “that raising the cost of labor will actually hurt low-wage workers because employers will decide to hire fewer people.” But NYT provides the rebuttal to this has-been argument:

It is not clear that employers will actually offset the cost of higher wages by employing fewer workers. Some economists say they believe that these higher labor costs might be passed along to consumers in the form of higher prices for goods and services, and that employers might also just accept a smaller profit margin when wages rise.

A landmark 1994 study by David Card and Alan Krueger, who is now the chairman of President Obama’s Council of Economic Advisers, found that raising the minimum wage did not lower employment in a case study of a local fast-food industry.

Dozens of similar studies, looking at a variety of locations and industries, have been published since then, and the results have run the gamut.

For example, a study of San Francisco airport employees, conducted in 2004 by economists at the University of California, Berkeley and the University of Waterloo, also found that increasing wages did not lower employment, and instead reduced employee turnover. But a literature review of a variety of studies published around the same time came to the opposite conclusion.

Read the entire NYT piece.