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A minimum wage field experiment

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4 Responses

  1. Michael, isn’t at least one reason that we don’t get these sort of information seeking legislative experiments (in addition to the cultural forces you cite) because of the time gap between the experiment and the results? I mean, to do this sort of diff-in-diff style of analysis in labor markets and other settings we need some time to elapse after the experiment before collecting data. Then there is the time elapsed in collecting and analyzing the data and time involved in forming a consensus re: interpretation of the results. The legislators doing the experimenting may well not be around to see the fruits of their creative efforts. Of course, their is always the more sinister explanation that they are not interested in more information …

  2. …or we could just let the states act independently in this arena. You know, kind of like the original idea behind the Republic…

  3. Andrew says:

    Would this experiment really work, though? The problem is that your control and your experimental groups would necessarily interact with each other. Imagine I am going to set up a business in a metropolitan area that spans two counties (or I am going to expand one branch, when I have branches in both). If I rely on low-wage labor, I might well choose the low-wage county. Similarly, if I were a low-wage laborer in the same area, I would seek work in the high-wage county. Disentangling these two phenomena would be difficult. (I suspect other macroeconomic factors, notably the unemployment rate, would determine which was more powerful.) Moreover, both would distort our experiment, which is to determine not where I will establish my business if I am faced with two different minimum wages, but whether I would establish it at all given the higher wage. It would be like conducting a trial of an immunostimulating drug while allowing the experimental subjects to steal white blood cells from the control subjects.

    The experiment might answer the question as to whether the US might lose jobs to other countries, but it would not tell us whether it would lose jobs compared to the hypothetical US where we did not raise wages. (I suspect, too, that the loss of jobs to foreign countries would be minimal, since most minimum-wage jobs are service-industry jobs that cannot be easily exported.)

    I haven’t thought this through entirely, but that is my first reaction.

  4. David S. Cohen says:

    Did the New York Times read your post? Check out today’s article comparing Idaho and Washington border towns.