| Effects of the Minimum Wage on Child Health George Wehby, Robert Kaestner, Wei Lyu, and Dhaval M. Dave #26691 Abstract: |
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My impression is that higher incomes for parents fairly consistently improve outcomes for kids, and this paper is consistent with that.
What it doesn’t do is to take into account poorer outcomes for children whose parents lose an income because they are priced out of the labour market. Since job loss for low-wage workers is the core critique of higher minimum wages, I’m not entirely sure that this paper advances the debate very far. I don’t know how big those job-loss effects are, or even whether they exist.
I do recall that Andrew Leigh once suggested that a 1.0% increase in the minimum wage could be expected to cut employment by between 0.15% and 0.39%. A 3% minimum wage rise, then, would cut maybe 60,000 jobs.
This loss is mostly invisible in the data, and in the paper above. But it does represent a bunch of families with kids that might end up with substantially lower outcomes from a minimum wage rise.
That said, the evidence in this whole field seems pretty marginal. Some more discussion here, in which I may be too hard on the Fair Work Commission:
https://www.theceomagazine.com/opinion/weeks-18-29-minimum-wage-hike-might-cost-jobs-need-find-sure/
the issue of jobs and the minimum wage is tricky and much misunderstood. What tends to happen with high minimum wages is that it stimulates higher skill jobs and higher skill acquisition, basically lifting the floor. What is usually not well-discussed though is what happens with those who really are not worth the minimum wage (of which there are always quite a few). They dont get regular minimum wage jobs because for-profit employers wont hire them for that amount. However, what tends to happen in those societies is the creation of subsidised or ‘special’ jobs that allow those people to be hired for lower costs to the employers. That seems to work ok. These are issues regression monkeys (even those of the randomista kind) usually miss though because this creation of new special subsidised jobs (as a means of looking after those not productive enough for the high minimum wage) doesnt show up in an ordinary regression.
Hi Paul,
First can you expand on what these special jobs are – perhaps a couple of quick examples.
Second I simply observe that this is a US study, where minimum wages start at a much lower level than in Australia, so there is a naturally a question about how transferable the results are.
T>
in the UK these include many traineeship jobs where the government organises training and job-placement, usually with a job subsidy to the employer. Job-subsidies for those with disabilities and long-term joblessness are prevalent too.
Sure, the US is not the world.
Thanks Paul. Those sorts of job subsidies have been used on and off in many countries over the years, and presumably for a given level of subsidy, an increase in the minimum wage will still increase the labour cost to employers.
I thought you might also have in mind some of the many jobs in the new economy – such as Uber driving, deliveroo etc – where people work as contractors, which I see in part as a way that the market circumvents minimim wages levels that might otherwise displace lower skilled people from paid work entirely. (Some people might argue that underpaying 711 staff, nannies or fruit-pickers is another way this occurs).
A fuller analysis of the effects of higher minimum wage levels on child health, or other outcomes of interest, would want to consider the extent to which this occurs – and the flow-on effects on the children of people pushed into these sorts of jobs.
Hi Tom,
yes, but it is not reasonable to hold those subsidies as given when talking about these ‘social jobs’ because their very point is to subsidise them enough to make those who fall through the cracks employable. Keeping them constant is ‘saying they dont exist for that very purpose.
I see uber jobs and such mainly as forms of tax evasion whereby the search intermediaries are competing with the tax authorities for the margins on supplied labour. There’s a push coming against them for that very purpose. The state will have to take over those intermediary activities (or bring the companies involved to heel in some other way).