Wisconsin-Minnesota comparison was flawed

This op-ed appeared July 28, 2018 in the Star Tribune

In “Progressive policies in Minnesota are working for workers” (July 26), her counterpoint to an earlier column from Prof. Noah Williams, Katie Hatt of the North Star Policy Institute writes as follows:

“Studies that consider only one pair of states — like the one cited in the earlier commentary … are inferior guides upon which to evaluate the impacts of public policies.”

And yet, in the next three paragraphs, Hatt goes on to use the findings of a May 2018 study by the Economic Policy Institute (EPI) to do that very thing — to consider only one pair of states in evaluating the impacts of public policies.

It is even the very same two states.

Hatt should heed her own advice. The EPI report makes a number of bogus claims based on cherry-picked data. For example, it uses annual data for 2010 to 2016 to claim that Minnesota’s economy has grown faster than Wisconsin’s since January 2011. But we have quarterly data available running from the final quarter of 2010 — a more precise starting point — into the last quarter of 2017. These more precise data show that over this period, in real terms, Minnesota’s economy grew by 10.9 percent and Wisconsin’s by 11.9 percent.

And there are plain misrepresentations. The EPI notes that, by December 2017, Wisconsin and Minnesota “have reached effectively the same unemployment rate, at 3 percent and 3.1 percent, respectively” and argues that “Minnesota was back at its pre-recession (December 2007) unemployment rate of 4.7 percent by September 2013, fewer than three years after Governor Dayton took office. In contrast, it took until December of 2014 — 15 months later — for Wisconsin to reach its pre-recession unemployment rate of 4.8 percent.”

But the EPI fails to mention that in the race to these pre-recession levels of unemployment, Wisconsin was starting from a rate of 8.1 percent and Minnesota was starting from a rate of 7.1 percent. From December 2010 to March 2018, Wisconsin’s unemployment rate fell by 5.2 percentage points to 2.9 percent, while Minnesota’s fell by 3.9 percentage points to 3.2 percent.

On the minimum wage specifically, Hatt writes, “As a resident of Minneapolis, I can attest that the sky is not falling following the City Council’s passage of a $15 minimum wage ordinance last year.”

Well, as the grandson of a 20-cigarette-a-day smoker who died at 86, I could attest that smoking isn’t bad for you. But anecdote is not the singular of data, and it is data upon which we must base public policy decisions.

What do the data show about the employment impact of minimum wages? In 2008, economists David Neumark and William L. Wascher surveyed two decades of research. They found that “minimum wages reduce employment opportunities for less-skilled workers … [that] a higher minimum wage tends to reduce rather than to increase the earnings of the lowest-skilled individuals … [that] minimum wages do not, on net, reduce poverty … [and that] minimum wages appear to have adverse longer-run effects on wages and earnings.”

In 2014, along with economist J.M. Ian Salas, they examined the subsequent literature and concluded “that the evidence still shows that minimum wages pose a trade-off of higher wages for some against job losses for others … ”

Prof. Williams is right about the minimum wage; the weight of evidence supports him. Data matter.

John Phelan is an economist at the Center of the American Experiment.