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January 21, 2010
Minimum Wage Increase Caused Loss of Part-Time Jobs, Economist Says

A minimum wage increase is the “most likely” reason part-time employment fell in the summer of 2009, says University of Chicago economics professor Casey Mulligan.

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Writing for a blog of the New York Times, Mulligan says that part-time employment increased for 9 consecutive months before beginning to fall steadily in August 2009. The federal minimum wage increased from $6.55 to $7.25 on July 24, 2009.

The federal minimum wage rose the two previous years and there were no steady declines in part-time employment associated with those increases.

Mulligan surmises that a lot of part-time jobs had wages that fell between $6.55 and $7.24 per hour and some employers simply couldn't afford to keep these part-time workers once the minimum wage went up to $7.25.

Some readers have left comments questioning Mulligan's conclusion that the minimum wage is to blame for the drop off in part-time employment. One reader noted that a lot of states were unaffected by the increase because they already had minimum wages equal to or greater than $7.25. Another said that the sudden drop-off could be an anomaly. To that point, the data show that from June to July part-time employment spiked before dropping significantly in August. In fact, part-time employment in the last 5 months of 2009 was higher than it was at any point in the first 5 months. However, it was increasing steadily in those first 5 months, but it was basically stagnant in the last 5 months.

“With all of this recession's significant labor market problems, it's too bad that an ill-conceived and unnecessary minimum-wage law added hundreds of thousands of people to the list of those who today cannot find jobs,” Mulligan concludes.

Source: New York Times Economix Blog

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