Serious Flaws Found in Study Linking Higher Minimum Wage to Job Losses – Next City

Serious Flaws Found in Study Linking Higher Minimum Wage to Job Losses

(AP Photo/David Goldman, File)

From St. Louis to Birmingham, Alabama, minimum wage laws are playing an increasingly prominent role in the “preemption” battles between blue city governments and red state legislatures. But despite their flash-point status, large-scale research behind both economic theories — that higher wages will lead to improved standards of living, which will circle around to support the local economy, or, conversely, that bigger paychecks will force employers to cut services and costs and hurt the local economy — is difficult to come by.

A number of studies do exist, but they’ve been critiqued for their methodology. One attempted to gather national data from around the time of the great recession — a difficult task considering how many state, local and hyper-local economies make up the U.S. Another looked at the early results of Seattle’s minimum wage hike, but excluded many multi-location businesses, meaning that it left out fast food chains, which are obviously a major employer of low-wage workers.

Now, another piece of research on the topic has had some significant holes poked in it, this time by the consulting firm behind it.

The study from Philadelphia-based PFM projected that 47,000 jobs would be lost by 2022 if Montgomery County, in Maryland, raised its minimum wage. This week, PFM recognized “a computation error,” and the group is now reexamining its methodology, the Washington Post reports. It expects that the revised estimate will be lower than the first projection.

The study was commissioned by County Executive Isiah Leggett, who vetoed an increase to the minimum wage (from $11.50 to $15) in January. PFM’s mistake, Managing Director Dean Kaplan told the Post, was failing to “accurately reflect responses from business owners, which were collected through electronic surveys and both phone and in-person interviews.”

But some see deeper flaws in the study than a mere “computational error.” County Council Member Marc Elrich, who has introduced legislation to raise the minimum wage and is running to replace Leggett as county executive, says fixing the research is impossible because it asked business owners to predict the effect of raising the minimum rather than looking at the results of an actual wage hike.

“Anybody who reads this study honestly would see it is a piece of garbage,” he told the Post.

Dave Cooper, a senior analyst at the Economic Policy Institute (which advocates raising the minimum wage), echoed his strong words on Twitter, and linked to a hefty 471-page analysis on the impacts of minimum wages as a more valuable resource than one-off studies.

UPDATE: This article was updated to include changes made to The Washington Post’s piece regarding the surveying of business owners.

Rachel Dovey is an award-winning freelance writer and former USC Annenberg fellow living at the northern tip of California’s Bay Area. She writes about infrastructure, water and climate change and has been published by Bust, Wired, Paste, SF Weekly, the East Bay Express and the North Bay Bohemian.

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