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Fifty years ago, the minimum wage debate was all but settled among economists. Left to their own devices, people seeking employment and employers seeking labour would settle at an “equilibrium price”. A statutory pay floor, the thinking went, would reduce the amount of workers employers demanded. Ninety per cent of economists surveyed at US universities in 1976 agreed with this logic. To anyone in this profession, that is the closest we might get to “consensus”.
That broad agreement fractured one generation later with the release of a blockbuster paper in 1994 by Princeton University economists David Card and Alan Krueger. After lawmakers raised New Jersey’s statutory pay floor by 19 per cent in 1992 to $5.05, the researchers found no effect on employment among fast-food workers in the state when compared with the equivalent labour market in bordering Pennsylvania. Though that finding was controversial at the time, mainstream opinion has since swung behind it.
Now, most economic communication about the minimum wage suggests that the negative employment effects are negligible, or at least that nothing like a consensus on the topic can be reached.
The minimum wage debate has since opened up again, especially in Britain following the...
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