Minnesota’s Economic News — W/E 9/24/21
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According to Milton Friedman, one of the great economists of the 20th century, “One of the great mistakes is to judge policies and programs by their intentions rather than their results”. This is a trap policymakers fall into all too often. It is also a trap which journalists fall into.
Last week, MPR News carried a story titled ‘Minimum wage workers in Mpls. to see boost in pay in July‘. It reported that
The minimum wage in Minneapolis will increase to $12.25 an hour for businesses that employ 100 or more workers and $11 an hour for smaller businesses. The increase is the third step in the city’s minimum wage ordinance, which has been in effect since January 2018. Workers in Minneapolis will make the full $15 an hour by 2022 for large businesses and 2024 for small businesses.
But this is only the intention of the policy. As economist Jeffrey Clemens wrote recently of a similar article,
The article does not consider that some of those workers may lose employment under the higher wage. It does not mention how employers might offset the minimum wage’s effects on their costs or how such changes might affect workers’ lives.
Research shows that these effects are very real. When Seattle raised its minimum wage to $15 per hour, experienced workers who were employed at the time of the raise earned $84 a month more. This sounds like vindication, but when we look more closely at the results we find that about a quarter of their increase in pay came from taking additional work outside Seattle to make up for lost hours. For inexperienced workers employed at the time of the raise there was no such ambiguity. They got no real earnings boost—they just worked fewer hours.
To be accurate, MPR News should have called its story ‘Experienced minimum wage workers in Mpls. to see boost in hours in July’ or ‘Inexperienced minimum wage workers in Mpls. to see no boost in pay in July’. Remember, it is results that matter, not intentions.
John Phelan is an economist at the Center of the American Experiment.