Matthew Lau: Minimum wages are even more harmful than we thought
According to George Mason University economist Alex Tabarrok, there is “an evolving new consensus on the minimum wage.” The first part of this consensus is that the minimum wage does not affect all groups of workers in the same way. Tabarrok cites two new National Bureau of Economic Research working papers: a study by Jeffrey Clemens, Melissa D. Gentry and Jonathan Meer concluding “that large minimum wage increases significantly reduce employment and labour force participation for individuals of all working ages with severe disabilities,” and a study by David Neumark and Jyotsana Kala concluding “that job loss effects from higher minimum wages are much more evident for Blacks, and in contrast not very detectable for whites.”
It’s not surprising that the most disadvantaged and lowest-earning members of the labour force would be most affected by minimum wage laws, but most research has focused on teenagers and youth. As the Clemens, Gentry and Meer study confirmed, however, people with severe disabilities are “indeed on the margins of employment” and there is evidence of “substantially more negative employment effects” for them following a large minimum wage hike. The decline in employment, they find, is “accompanied by a decline in labor force participation and a downward shift in their position in the wage distribution.”
Their study used American data, but the minimum wage’s negative effects on disabled workers are not bounded by geography. In 2018, Ontario’s Liberal government hiked the minimum wage to $14 per hour and terminated the exemption for organizations hiring disabled workers. The result was that most such organizations stopped hiring people with cognitive disabilities while some let go already employed
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