"It's just got to be reducing employment, it's just got to be," said one, quoted in the Financial Review. Business will be forced to "reduce costs through cutting jobs or other investments," said another, in The Australian. You'd think so. If a business' costs go up and its income doesn't, it'll have to cut back. It makes sense. Just as it makes sense to think that lower class sizes improve educational outcomes. They ought to. But while that's obviously true in extreme cases (if class sizes or wages were increased tenfold, it would hurt), normal-size adjustments, of the kind that are usually made, seem to have no effect whatsoever. And these are some of the most intensively studied questions in economics. I'll leave class sizes for another day. On wages, the commissioners said those studies had "fortified" its view that modest and regular wage increases "do not result in disemployment effects". The latest, and most damning, is a seven decade-study released in May by the United States National Employment Law Project entitled Raise Wages, Kill Jobs?

"If the claims of minimum wage opponents are akin to saying 'the sky is falling', this report is an effort to check whether the sky did indeed fall," the authors say. They examined each of the 22 increases in the US federal minimum wage between 1938 and 2009 to determine whether either employment or hours worked had dropped in the year that followed. "The results were clear: these basic economic indicators show no correlation between federal minimum wage increases and lower employment levels, even in the industries that are most impacted by higher minimum wages," they reported. We find it hard to believe that modest wage increases don't cost jobs, because they ought to. "To the contrary, in the substantial majority of instances (68 per cent) overall employment increased after a federal minimum-wage increase. In the most substantially affected industries, the rates were even higher: in the leisure and hospitality sector employment rose 82 per cent of the time following a federal wage increase, and in the retail sector it was 73 per cent of the time."

"Moreover, the small minority of instances in which employment declined, all occurred during periods of recession or near recession. That pattern strongly suggests that the few instances of such declines are better explained by the business cycle than by the minimum wage." They go on to observe that their findings aren't really surprising. Study after study has found the same thing. We find it hard to believe that modest wage increases don't cost jobs, because they ought to. Where's the employer going to find the money? But cutting jobs can cost money, and the money can come from higher prices and from getting more out of each worker, so-called productivity growth. Of late productivity has been growing faster than wages, so the commission's decision puts things back into balance. And partly because when workers are paid more, they stay more and become better workers, and even become better ambassadors for the businesses that employ them. And because, occasionally, wage increases are really big. When they are big enough, low wage workers become higher wage workers and spend more, especially in shops and food outlets, the kind of industries that are likely to employ them. There's just a chance the commission knows what it's doing.

Loading Peter Martin is economics editor of The Age. Follow Peter Martin on Twitter and Facebook