Free the Wage

Daniel Garza Economic Prosperity

freethewage_1022x535In recent years, the minimum wage has been a charged, polarizing, hot-button issue in American politics. It has also attracted significant attention in economic research, as advocates and opponents alike attempt to measure its effects on employment, prices, and poverty. The effect of the minimum wage on employment is especially significant, and it stands out in public polling on the subject. A majority of Americans—67 percent—support raising the minimum wage as a general principle, but this support diminishes in certain contexts. When Americans are asked if they would continue to support the minimum wage even if businesses were forced to cut jobs, this 67 percent support reverses to 58 percent opposition. Support for the minimum wage among Hispanics is even more sensitive to concerns about employment than that of the general population. In fact, while 74 percent of Hispanics support the minimum wage in the abstract, 58 percent oppose it if it will lead businesses to cut jobs. Given that Hispanic attitudes toward the minimum wage are so sensitive to concerns about its effects on employment, the issue deserves serious attention in economic research.

This report builds on existing research to examine the effects of the minimum wage on Hispanic employment. To do this, it relies on a theory of wages as prices outlined by F. A. Harper in order to lay out a number of predictions regarding the relationship between the minimum wage and employment. Then, using data from the Bureau of Labor Statistics, this report examines trends in the employment-to-population ratio of certain types of Hispanic workers—such as younger or less skilled workers—as they relate to changes in the minimum wage from 1974 to 2014, based on methodologies used in two previous analyses. From this analysis, we conclude that Hispanic concerns regarding the results of raising the minimum wage are well founded.

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Executive Summary

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