Fact Check: Pay Hikes for Minimum-Wage Workers

Fact Check: Pay Hikes for Minimum-Wage Workers

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Image: Unfounded

Update: This post has been updated to reflect new information that emerged after the initial Fact Check. A full explanation is after the original text.

This is the first post to use our new Fact Check ruling, Unfounded. Check out this explanation for the new ruling and some other new Fact Check features.

Statement: “Two-thirds of minimum-wage workers earn a raise in the first year,” entrepreneur Michael Robertson wrote in a Jan. 4 U-T San Diego op-ed.

Determination: Unfounded

Analysis: Talk of minimum wage hikes is all the rage with Democratic leaders this year.

Progressives from President Barack Obama to interim mayor Todd Gloria are pushing such increases, which they say will help struggling families and provide an economic boost. Some Republicans and libertarians, including tech entrepreneur Michael Robertson, argue government intervention could have an adverse effect on businesses and jobs.

In a January U-T San Diego op-ed, Robertson said minimum-wage jobs represent a stepping stone. Two-thirds of minimum wage earners receive pay hikes within their first year on the job, he said, a reality he argued undercuts the need to raise pay. Why make more pay mandatory, the thinking goes, when most businesses voluntarily give people raises soon after they start and an increase could discourage them from hiring in the first place.

Washington Post columnist George Will, who also leans right, cited the same statistic in a December column.

What neither mentions is that the source of this nugget is a 10-year-old study based on information collected from 1979 to 2002, years before the Great Recession began in December 2007.

Economics professors Bill Even of Miami University in Ohio and David Macpherson, then of Florida State University, relied on Census data to draw conclusions about wage growth among minimum wage workers.

Their research was funded by the Employment Policies Institute, a group that has opposed minimum-wage increases and Democrats’ health-care reform.

In December, The Atlantic referred to EPI as “an organization that exists largely to fight against minimum wage hikes.”

But Even, one of the professors who conducted the study, recently told Voice of San Diego that EPI didn’t drive the results of his research. He said the group simply published what he and Macpherson submitted.

So let’s take a closer look at that research and what it found.

Even and Macpherson did indeed find that 62.6 percent of minimum wage workers – nearly two-thirds – surpassed that hourly sum within their first year on the job thanks to a raise.

The authors also found median hourly pay growth averaged 10.4 percent for minimum wage workers between 1998 and 2002. At the time, the federal minimum wage was $5.15 an hour, so the hike would have amounted to about 54 additional cents per hour. (California’s minimum wage varied during this period.)

Even was hesitant to predict whether they would have seen similar wage growth in more recent years.

“It could be better or worse than that today,” Even said. “I don’t know without looking at the data.”

He suspects the percentage of minimum-wage workers receiving raises fell during the recession and may have started to pick up again as the economy recovers.

But Even said he can’t know for sure whether almost two-thirds of today’s minimum wage workers have graduated from that pay scale within their first year of work. He’s not aware of any other research on the topic, and we couldn’t find any either.

“Obviously, that statistic is a bit dated. I have not done an update of that study. It is kind of interesting that there hasn’t been any type of research on that since our research was written,” Even said. “As to whether that statistic is relevant today, I think it’s hard to say.”

We recently created a new ruling – unfounded – to label statements that we can’t prove or disprove. There’s simply not enough evidence to establish whether they’re true.

Robertson’s claim deserves this label because the study he relied on was completed about a decade ago and appears to be the only research that delved into this specific topic.

Robertson argues the existence of the study – and its conclusion that nearly two-thirds of minimum-wage workers received raises within a year – should be acknowledged.

“There’s no data that says they don’t,” Robertson said. “Could you say the data is aged? Yes.”

But his argument is problematic. Economists can’t even agree on whether minimum wage increases help or hurt the economy, and the research Robertson cited was bankrolled by a group with a specific view on the issue. The researchers maintain that they took an even-handed, unbiased approach to this study but without separate studies, it’s virtually impossible to know.

Then there’s the fact that in the space since the study was released, the nation’s economy has tumbled off a cliff and only slowly, partially clawed its way back. New technologies have changed the workforce and the U.S. has weathered the worst recession since the Great Depression.

For that reason, even one of the authors of the study Robertson cited couldn’t say whether the results are relevant today.

If you disagree with our determination or analysis, please express your thoughts in the comments section of this blog post. Explain your reasoning.

♦♦♦

StretchUpdate  Feb. 21, 2014: At the time we issued our original ruling, the study Robertson referenced to back up his statement was the only one we could find on the issue. This week, we learned about another relevant one.

The research director at the Employment Policies Institute, the organization that paid for the study we focused on in our initial Fact Check, emailed Voice of San Diego to share a new study that validates Robertson’s claim.

In December, Jonathan Meer and Jeremy West of Texas A&M University published a study that took a broad look at how the minimum wage affects job growth and found a negative correlation. This work was not funded by an outside group, though Meer is also a faculty research fellow with the National Bureau of Economic Research, a nonpartisan economic research group.

One of the study’s many data points was Meer and West’s expanded look at the percentage of minimum-wage workers who received raises.

Meer, an economics professor, and West, a doctoral student, reviewed Census data from 1979 to 2012 and found that about 65.9 percent of minimum-wage workers surpassed that hourly sum after a year on the job.

That’s actually a higher percentage than researchers found in the 2004 study that Robertson cited. Meer told VOSD that he and West have since used another Census data strain to look at the same issue and came up with a similar conclusion.

But simply saying 65.9 percent of minimum-wage workers received pay hikes leaves out some critical context. The researchers found about 16.6 percent of minimum-wage workers leave the workforce after a year and another 5.9 percent become unemployed.

That turnover is considerably higher than the overall 3.1 percent separation rate the Bureau of Labor Statistics recorded in 2013. The difference shows employers are losing minimum-wage workers at a much higher rate than the U.S. average.

If you factor in this attrition for minimum-wage workers, only roughly 51 percent received raises within a year.

In light of Meer and West’s conclusions, we decided to take a second look at Robertson’s claim that two-thirds of minimum-wage workers receive a raise after a year. We sometimes reconsider our Fact Check rulings when we come across new information and decided it was worthwhile to do so here.

The evidence Robertson provided for our initial Fact Check merited the ruling he received. Even the economics professor who conducted the 10-year-old study that Robertson based his statement on couldn’t say whether he’d consider it relevant today. He said he’d prefer to see an updated study, and was surprised no other economists had looked at the issue since 2004.

It turns out there has been additional research though, and its conclusions showed there was some truth in Robertson’s claim.

He said two-thirds of minimum-wage workers receive raises within a year and that’s accurate when you consider those who remained in the labor force. That figure, however, leaves out the workers who left their jobs behind or were fired.

That makes Robertson’s claim a stretch. It contains an element of truth but it’s missing critical context that may alter the impression his statement left.

Voice of San Diego is a nonprofit that depends on you, our readers. Please donate to keep the service strong. Click here to find out more about our supporters and how we operate independently.


Lisa Halverstadt

Lisa Halverstadt

Lisa Halverstadt is a reporter at Voice of San Diego. Know of something she should check out? You can contact her directly at lisa@vosd.org or 619.325.0528.

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18 comments
Richard Rider
Richard Rider subscribermember

What's missed in this discussion of "minimum wage" employees is that a large segment of them make $12-$30+ an hour.  That's because, in CA, a full minimum wage must be paid to ALL employees -- including "tip" employees.  Waiters, busboys, valets, hotel room cleaners, casino employees, etc. make much of their living off tips. 

In some other states, these categories often can be paid a reduced minimum wage -- understanding that their total compensation included tips.  Not so in California.  And because these employees make so much in tips, they will NEVER be paid more than the mandated minimum wage.  Nor should they be.

In our state, being a waiter or casino dealer can be a highly desirable job -- as more and more college grads are discovering.  This results in a "misallocation of labor -- overqualified people holding semi-skilled jobs (okay, dealing IS a skilled job!).  This distortion also "crowds out" job opportunities for folks who normally would qualify for such employment, increasing long term unemployment among the less educated.

A higher minimum wage will only increase this distortion.

Michael Robertson
Michael Robertson subscribermember

Well bravo to VOSD and Lisa for keeping an open mind to do a fact check on their own fact check. But why a "stretch" and why not TRUE? The second report confirms the first and btw confirms what I said in my initial response there's no evidence that human behavior has changed since the first study. 


I'm still confused why it's not TRUE. I guess because I didn't qualify the comment with "2/3rds of  <THOSE WHO KEPT WORKING> got a raise within 1 year". Obviously it is implied that to get a raise you have to keep working. To criticize my comments because someone might have gone back to school or stopped working to be a parent or died or whatever ...I just find very curious. 


Thanks for revisiting it though. 



Phillip Franklin
Phillip Franklin subscriber

Isn't Michael Robertson writing an op-ed piece on an economic issue similar to Al Capone writing  an op-ed on tax laws?  My guess is that if Al Capone were still alive the U-T would be asking him to write such a column.

Rick Smith
Rick Smith subscriber

"Minimum wage is an assault on personal freedom."


Really?

David Cohen
David Cohen subscriber

Fascinatingly irrelevant. The rating seems justified.

CA is increasing the minimum wage, and further increases are likely.  If a business decides to keep fewer employees as a result, then it must currently have too many employees.

michael-leonard
michael-leonard subscriber

While I do not agree with Mr. Robertson's assertion, I *do* agree that this new fact check is mis-named. I suggest you call it "unsupported" instead.

Michael Robertson
Michael Robertson subscribermember

Yeah, my first fact check! I've now officially made the big time 


A few comments. Commendable research from Lisa to call the studies author, but a few corrections are necessary. 


I'm not "right" leaning. I'm freedom leaning. I'm always for maximum freedom - as long as you don't hurt other people or take their stuff. It's preposterous that the government decides how consenting adults interact - whether in the bedroom or the boardroom. 


Minimum wage is an assault on personal freedom. 


As for this fact check "Unfounded" means without facts. I presented facts in the editorial such as the study. I also explained to Lisa I interviewed several local businesses. It's a shame Lisa didn't do the same because it would have confirmed exactly what I wrote. 


Sadly VoiceofSanDiego strong left bias taints their judgment. Lisa wants to believe that politicians can manufacture productivity but they cannot. The study is 10 years old but so what. There's no data that human behavior has changed. None. Zero. Only her views. 


Finally, I invite anyone who wants to learn more about what economists think about the image of minimum wage laws to check out Professor David Neumark's comprehensive research. Their near universal conclusion is that it hurts the low skilled worker by locking them out of the most cost-effective educational path - a job. Here's the link http://www.epionline.org/studies/Neumark-01-2013.pdf

Chris Brewster
Chris Brewster subscribermember

Mr. Robertson has an extraordinarily unseemly past that seems to have propelled him to great wealth despite serial allegations of massive copyright infringement. http://freespire.com/ From what moral, ethical, or authoritative platform does he opine about people on the lowest end of the income scale?


David Cohen
David Cohen subscriber

@Jim Jones

Even one of the authors says the applicability of the study to current circumstances is unknown.  Only Jones-type ideologues would claim that agreeing with one of the original authors is "political bias."  Same old, same old from the persistent grumbler.

Mark Giffin
Mark Giffin subscribermember

@Michael Robertson  

Michael. Saw  bumper sticker in San Diego.

"the facts, though interesting, are irrelevant"

Guess you didn't see it but thanks for trying to point them out

Chris Brewster
Chris Brewster subscribermember

@Michael Robertson Does using other people's intellectual property for personal profit not qualify as taking, "their stuff?" There seems to be massive moral ambiguity in your view of the world.


As for the minimum wage issue, as I'm sure you know, there are many respected views on the issue which do not all point to a single conclusion.

Bill Sheffler
Bill Sheffler subscribermember

@Chris Brewster  When one can't defeat an argument, mount a personal attack. That's typical establishment politics.

Chris Brewster
Chris Brewster subscribermember

Mr. Sheffler: What concerns me is not the argument. No doubt many people have a similar opinion and in the marketplace of ideas and that's OK. What concerns me is that the UT gave an individual with an enormously tawdry past that involved reaping tens of millions of dollars through the use of the intellectual property of others a forum to moralize about the minimum wage. They simply called him an Internet entrepreneur. To me it's similar to having Angelo Mozilo opine about finance. Is there no shame? Surely the UT can find an honorable person to advance their views.

Chris Brewster
Chris Brewster subscribermember

Mr. Jones: Actually, I wasn't really commenting in this instance on the VOSD determination vis-à-vis Mr. Robertson's assertion. My issue has to do with the semantics of the term, "unfounded." To me it implies that the assertion is bogus, which in my mind is the same as, "untrue." My view is that if VOSD wants to say that a given assertion MAY be true, but lacks sufficient proof, it is "unproven." So it might be true or it might not be true. Whether either is appropriate in this case is another matter.

Chris Brewster
Chris Brewster subscribermember

@Michael Robertson Robertson: Profiting from the intellectual property of others without their permission is dishonorable.

Michael Robertson
Michael Robertson subscribermember

@Chris Brewster  I have had and continue to have prolific stalkers - it's just part of the game when you have success in the US. A disgruntled former employee run an ongoing campaign to smear me. You're free to believe them or not, but read what a jury had to say about what happened: http://www.michaelrobertson.com/archive.php?minute_id=347


And as Bill said, a personal attack is irrelevant to the point I made that minimum wage hurts the poor, the uneducated, the unskilled and our economy. 


If you want to know if I'm "honorable" or not, then come have lunch with me. I'm easy to find.