Dean Baker and John Schmitt
Salon, January 4, 2012

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Eight states and one city (San Francisco) raised their minimum wage this week, providing a pay raise to just over 1 million workers. In the face of this good news, the opponents of the minimum wage are warning of serious job loss. They are likely to be proved wrong, yet again.

A simple Econ 101 story argues that a higher minimum wage will lead to fewer jobs for teenagers and other workers at the bottom rungs of the labor market. However, at this point a large body of research shows that increases in the minimum wage at the national, state and even local levels have not cost jobs. That may sound counterintuitive; after all, economists always say that when the price rises, demand falls. This should mean that with a higher minimum wage, employers will want fewer workers.

The real story, however, is somewhat more complex. Employers not only care about the wages they pay, they also care about workers’ productivity, and the rise in the pay by itself may cause workers to be more productive.

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