It’s not a crazy concern. When the national minimum wage goes up, no business is at a competitive disadvantage — they all face the same wage floor. It’s fair to wonder whether sub-national minimum wages might encourage businesses to avoid an increase by moving, a question with implications for people all over the country — from Olympia, Wash., to Lexington, Ky., to Bangor, Maine — who are trying to secure a raise. The geographical variation that has sprung up over time, however, has allowed economists to test Hubbard’s claims, and the evidence supports the actions of the Birmingham city council.
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This variation has provided opportunities for something rare in empirical economics: quasi-experimental studies. In one famous paper, economists Alan Krueger and David Card compared fast-food employment in New Jersey, which raised its minimum wage in 1992, with that in Pennsylvania, which did not. “We find no indication that the rise in the minimum wage reduced employment,” they concluded.
Are sub-state localities different from states? Another important study gets at this question by looking at county-level data, comparing every contiguous county across state borders where minimum wages differed over the course of 16 years. Instead of “all sorts of problems,” the researchers found “no evidence of job losses for high impact sectors such as restaurants and retail.”
