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Noah Smith

Econ 101 No Longer Explains the Job Market

Supply-and-demand theory once made sense. That was before employers gained so much power.
What's the message here?

What's the message here?

Photographer: Robert Alexander/Getty Images

The battle over the effects of minimum wages has been one of the most protracted and bitter fights in the history of empirical economics. Some researchers, such as David Neumark of the University of California-Irvine, continue to insist that pay floors kill jobs, and a few studies find negative effects. But a series of very careful, large-scale studies is finding that the minimum wage is as benign as its advocates have suggested.

One of these is a study by economists Doruk Cengiz, Arindrajit Dube, Attila Lindner and Ben Zipperer, which looked at state-level evidence and found no negative effect of mandated pay increases on employment. They found that minimum wage hikes tend to decrease the number of jobs just below the new cutoff, but increase the number above the line -- implying that the wage hike isn’t killing jobs, but simply giving people raises.