Higher minimum wage correlates slightly with higher unemployment

IT’S A LOCAL STORY: Higher minimum wages do not seem to have hurt New ­England excessively – three states have among the lowest 10 jobless rates in the nation. And Massachusetts, with the third-highest minimum wage in the nation, comes in at No. 17 for lowest jobless rate in the nation. No one ever said New England followed all the national trends.
IT’S A LOCAL STORY: Higher minimum wages do not seem to have hurt New ­England excessively – three states have among the lowest 10 jobless rates in the nation. And Massachusetts, with the third-highest minimum wage in the nation, comes in at No. 17 for lowest jobless rate in the nation. No one ever said New England followed all the national trends.

One of the primary arguments against raising the minimum wage is that employment will drop, especially among young, entry-level workers.

A cursory look at the numbers does not support that thesis, since the state with the lowest unemployment rate at the end of 2017 was Hawaii, at 2 percent, according to the U.S. Bureau of Labor Statistics, while its minimum wage is $10.10 per hour (the same as Rhode Island’s).

Of course, one number does not refute an argument. Among the 10 states with the lowest unemployment rates in the nation, five have the federal minimum wage of $7.25, while four of them have minimum wages of $10 or more.

Among the nine states and the District of Columbia with jobless rates of 4.7 percent or more, only Pennsylvania hues to the federal minimum wage of $7.25, while New Mexico, with a minimum wage of $7.50 per hour, has an unemployment rate of 6 percent, second-highest in the nation.

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Still, in a broad sense it seems there is a small tendency for lower wages to increase employment, as higher wages and higher unemployment show a correlation of 0.155 (a correlation of 1 would indicate that higher wages and higher unemployment move in lock step, while -1 would indicate they move in opposite directions).

What does this mean for Rhode Island, which has a minimum wage of $10.10 and will add another 40 cents per hour at the beginning of 2019? Based on the national trend, the state should not be surprised if there is a slight uptick in the unemployment rate come the new year. But there is a lot of time until then.