Senator’s claim smells fishy

Added May 21st, 2014 by Peter Ruark | Email This Entry Email This Entry
Peter Ruark

Two out of the last three times the minimum wage was raised, Michigan’s unemployment rate decreased in the years that followed.

That indisputable fact makes a recent claim from state Sen. Pat Colbeck, R- Canton, surprising.

The Detroit Free Press and the Detroit News reported last week the senator’s assertion that raising the minimum wage will decrease the rate of employment “every time.” This false claim needs to be corrected.

In the early 1990s, after nearly a decade at $3.35 an hour, Congress raised the minimum wage in two steps to $4.25 with the final step taking effect in April 1991. As the country was in a recession, Michigan’s unemployment rate was 9.6% that month and remained at that level a year later in April 1992. Then the unemployment rate began a steady drop that lasted several years.

bar graphs showing growth of jobsSeveral years later, when Congress raised the minimum wage in two steps to $5.15 in 1997, the unemployment rate continued to go down.

Only after the most recent raise, the three-step increase in Michigan’s minimum wage to $7.40 in 2008, was there an increase in unemployment soon afterward. As is well documented, the high unemployment was due largely to the manufacturing decline and its spillover effects on other industries.

The restaurant industry, which employs many minimum wage workers, added thousands of jobs after the 1991 and 1997 increases. Although Bureau of Labor Statistics restaurant employment data prior to 2000 is limited to full service restaurants, the statistics show that such restaurants added nearly 4,000 jobs in Michigan during the two years following the 1990-1991 increase and 5,600 jobs the two years after the 1996-1997 increase.

While restaurant jobs were lost along with the loss in high-wage sectors that occurred after the 2006-2008 increase, they rebounded within four years. Full service restaurant jobs are now at their highest levels in decades. While some in the restaurant industry loudly oppose any minimum wage increase, others such as Subway and Zingerman’s support a minimum wage increase that includes an annual cost of living adjustment.

As efforts continue to give workers in Michigan a much-needed increase in the minimum wage, false canards should not go unchecked and unchallenged, and it is important to set the record straight when such claims are made.

Regarding last week’s fishy factoid, it’s time to stick a fork in it—it’s done.

— Peter Ruark

2 Responses to “Senator’s claim smells fishy”

  1. Andrew says:

    Although I appreciate the article and the findings, I am not convinced. Correlation does not mean causation. There was far too many things going on in the 1990’s that led to economic growth and job addition, and it cannot all be attributable to raises in minimum wage.

    Although I am not dismissing Mr. Ruark or Senator Colbeck’s claims completely, a raise in minimum wage was not the only factor in 1990’s job and employment growth. It is entirely possible, probable, and plausible that employment growth was rising regardless of increases in minimum wage.

    The real question that political science can answer is how much did raising minimum wage affect the job growth in the 1990’s? There are tons of data sets we can examine, and we have the programming tools, such as Stata statistical analysis software packages, to truly determine what impact raising minimum wage had.

    I would be glad to take part in such a study, should MLPP decide to further study the matter.

  2. Peter Ruark Peter Ruark says:

    Andrew, thank you for your comment. My article did not attempt to provide an explanation for the increase in jobs following the two minimum wage increases in the 1990s or for the decrease following the increase in 2008. Rather, it showed that Senator Colbeck’s correlation (upon which he based his implied causation) does not even exist.

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