My guest for this episode is Ekaterina Jardim of the University of Washington. Ekaterina is one of the authors of the new minimum wage study that has been making headlines recently, “Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle.” One reason this study is so interesting is that it was funded by the City of Seattle, which is something that governments aren’t obligated or expected to do when they enact major policy changes like these minimum wage hikes.

There was a broad theoretical and empirical consensus in the 1980s that higher minimum wages have disemployment effects on the low skilled, and then Card and Krueger (1994) started a new empirical literature that found no evidence of disemployment effects.

A major problem with Card and Krueger (1994) and with many of the other studies conducted over the past quarter century was their use of proxy measures for low-skilled workers. Instead of looking at workers who actually earned less than the new minimum wage, these studies looked at groups that they knew to contain many minimum-wage workers: generally teenagers or restaurant workers. This new study does not face this limitation because Washington State requires firms to report both the hours worked and the wages of all workers.

One criticism I’m seeing a lot in response to the media coverage of this study is the fact that they had to drop multi-location firms from the sample. The reason for this is that the data only shows what firms people work for, not their location. So if a firm has locations both inside and outside Seattle, you don’t know whether a given worker in that firm belongs in the treatment or the control. Still, despite this limitation, the study’s sample included over 60 percent of workers in Seattle. Furthermore, the study authors surveyed employers and found that the multi-site firms that were excluded from the sample actually reported more reductions in work hours than did the firms that remained in the sample. So if anything, this omission understates rather than overstates the effect of the minimum wage increase.

One big concern people have is just how much this study’s results deviate from the established literature. The authors address this by repeating their analysis using employment in the restaurant industry as a proxy for low-skilled labour. They find that using this proxy for low-skilled labour reduces the measured impact of the minimum wage to near zero, consistent with past studies that have looked only at the restaurant industry.

It seems that this apparently robust finding, replicated in study after study over the past few decades, was actually a quirk of studying the restaurant industry, which tends to substitute high-skilled labour for low-skilled labour rather than cutting total labour hours as a short-run response to minimum wage hikes.

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  • This will be a general discussion to share tips and tricks to survive conventional Keynesian Economics Lessons in university.

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  • Does this list have anything else that could be added to it? The goal is to have a checklist that could be used to check any article on the topic. I would guess most people on this site are aware that arbitrarily raising the cost of labor isn’t the best way to help workers.

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  • The “Tax Honesty” movement has demonstrated a few things to a lot of people.  To cover a lot with a few words, I’ll put it this way:  The IRS breaks its own rules in order to rob us through deceit. Some people (Irwin Schiff, for example) have suffered because they attempted to protect themselves from the rule-breakers.  There is now a theory popular among liberty-minded people that the government is too corrupt and powerful for anyone to succeed in an effort like Irwin Schiff’s.  There is also some good evidence showing this theory to be wrong.  It’s available at Peter Hendrickson’s website, I think that a lot of bureaucrats feel and believe that they are helping society.  This leaves them open to consider fixing situations in which their bureaucracy is breaking its own rules.  And let’s face it, there are some rules that can actually help liberty.  Perhaps the loads of evidence that Hendrickson has on his site can be explained by the presence of such “good-hearted” individuals in the bowels of the IRS. In any case, if you can, please entertain the possibility that the US Income Tax is not being administered honestly.  Consider that maybe, just maybe, in the gargantuan tangle of words called “Title 26,” the legal meaning of the law as it applies to most people is not coercive at all.  Maybe, if it were properly applied, the government would be a nuisance like neighbors who let their dogs poop on your lawn, instead of a nuisance like cancer in your lungs.  It could be true.  I think it is true, and I think that failing to follow all the twists and turns that Hendrickson uncovered to see for yourself that it is true kind of justifies you still being enslaved to a government that steals from you in order to cause havoc all over the planet in a massive deception that justifies its existence. If we want to honor the goodness in all people, including those who have been tricked into serving evil, we can do so by understanding the rules they think they should be following, and using them to protect ourselves from enslavement.

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  • It can be a challenge to keep up with all the taxes one needs to pay throughout the year, and than to deal with all the paperwork that needs to be filed can be frustrating. What would be a good way to simplify the Tax Code? Below is a list of some of the taxes that we the people need to pay, or at least we experience their effects at one time or another. -Medicare, Medicare, Social Security, Federal Inocme Tax, State tax, Local Tax, Corporate tax, Sales Tax, Property Tax, estate tax, alcohol tax, tobacco tax, gift tax, tariffs on imports and exports, etc. Would a simple flat or consumption tax do the trick?

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  • Hello, I’ve become quite keen on Jeffrey Rogers Hummel views on inflation. That governments don’t get as much cash money as they used to from Seigniorage(money printing)…becuase of some details of the modern banking system. Hummels view is that the US Gov is more likely to actually default on it’s bonds than print it’s way out of it’s financial problems as so many of us libertairans often predict. Any way…. how are people actually calculating the revenue states are getting from seigniorage? There is constant mention to specific statistics in his works on what revenue governments make from printing money…but how are economists attempting to calculate this so exactly? “Almost none of the developed countries could boast seigniorage amounting to more than 1 percent of GDP, despite the fact that the study incorporated the inflationary years of the 1970s. Joseph H. Haslag’s smaller sample of 67 countries over a longer period, 1965 to 1994, finds that seigniorage averaged about 2 percent of total output for the entire sample, ranging from as low as 0.25 percent to as high as 9.98 percent (for Ghana).” However, I’m not smart enough to figure out how this is being calculated? When I Google — I see Seignoarge defined as the cost to money vs what the money is worth. (if it costs 1cent to print a dollar bill than Seigorage is 99cents). Pennies have negative seigniorage — cost the Gov more to mint than 1 cent.) But for the point Hummel is making it seems like a more sophisticated calculation? How did people figure out that for example in WW2 seignorage was 6%? Perhaps this is rather obvious? Thanks! –Luke

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