State Power

High Minimum Wage and High Unemployment: Perfect Together

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When this is your regional dish, a job is the least of your worries.

Sixty-three percent of states with high minimum wage laws are suffering unemployment rates higher than the national average (which is now at 9.1 percent and expected to rise to 9.2 percent when the September Employment Situation Summary is released Friday). 

That's my tortured finding from 247wallst.com's pageant of the eight highest-minimum-wage states in the U.S.A. 

Cross referencing these eight with state-level unemployment numbers from the U.S. Bureau of Labor Statistics, we find that five are among the states with higher than average unemployment, and two of them (sick men of North America California and Nevada) are at the top of the flyblown pile. 

In ascending order of state-ordered generosity, the eight living-wagiest states are: 

8. California (unemployment 12.1 percent; minimum wage $8.00)
7. Massachusetts (unemployment 7.4 percent; minimum wage $8.00)
6. Vermont (unemployment 5.9 percent; minimum wage $8.15)
5. Connecticut (unemployment 9.0 percent; minimum wage $8.25)
4. Illinois (unemployment 9.9 percent; minimum wage $8.25)
3. Nevada (unemployment 13.4 percent; minimum wage $8.25)
2. Oregon (unemployment 9.6 percent; minimum wage  $8.50)
1. Washington (unemployment 9.3 percent; minimum wage $8.67)

Full story, which contains some interesting data on how cost of living, median income and union membership correlate with minimum wage. 

Fun fact: They were originally going to call them the Maine Patriots.

I would call the minimum-wage/joblessness correlation real but not overwhelming. It would be interesting to see another data point in this list: number of pages in each state's legal code, along with the average number of pages of statewide regulations in the United States.  

There's a common sense argument that requiring all employers to pay higher wages depresses the inclination to hire, especially at the entry level – and even the United Kingdom's forthrightly named Low Pay Commission conceded recently that "Firms may be reluctant to create jobs by recruiting inexperienced staff because they are put off by the increased wage bill." But the variables that affect hiring go beyond base pay. 

If this is a Gloucesterman, where's the heroin?

The real stunner for me, though, is how New England manages to beat the odds. The three states where high minimum wage laws do not correlate with high unemployment are all clustered in the northeast. I would have led with that news, but I suspect I'm not the only person who finds the phrase "New England" eyelid-heavying and the incantation "Massachusetts…Connecticut…Vermont" coma-inducing. 

Still, the region's relative employment health is noteworthy. Rounding out the New England unemployment figures we have Maine (7.6  percent) and New Hampshire (5.3 percent) far below the dismal national unemployment rate and only tiny, clean-living Rhode Island (10.6 percent) above it. 

Any theories? Did the flow of hardworking immigrants from Portugal and County Cork never slow down? Is it Yankee ingenuity? A maple syrup boom the mainstream media have been ignoring? Brisk business in fall-foliage tourism? 

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  1. High diversity with pockets of towns, high mobility between the towns, and the fact that they already outsourced their outsourcable industries to the South decades ago.

  2. New Hampshire has no sales tax and no income tax. It’s where people from MA go to shop.

    Unemployed Yankees have a long tradition of leaving. Heading west or south and never returning. I did both.

    1. That’s my theory. It is really easy to leave New England for work.

    2. Exactly. New England tends to export low IQ, non productive types. Places like the South and West import those type of people, the sort of people to whom no one wants to pay a high minimum wage.

      1. The other nice thing about leaving New England is that you put a lot of pompous fucking assholes in your rear-view mirror.

  3. My theory is that you’re seeing patterns that aren’t there. The highest and second highest minimum wage states are not much above the national unemployment rate, and California is only 8th in minimum wage but 2nd in unemployment.

    I agree that minimum wage increases negatively affect employment rates all other things being equal, but all other things aren’t equal between states.

    1. if it’s just one state, you have a case for correlation not equaling causation. When it is several of them, it is at least a trend. Several of the states listed also have high tax rates and I believe each is blue-run, which is hardly a coincidence.

      1. The correlation between blue-run and high minimum wage is believable. Correlation between blue-run and high unemployment isn’t there.

        3 of the 8 states he lists are well below the national unemployment rate, and 2 others are not much above it.

        1. as you said previously, all things are not equal between states, though high taxes and high minimums don’t sound like a favorable combination. I’d settle for agreement that the minimum is useless from a practical standpoint and serves no purpose beyond the political.

          1. Even if cause and effect does exist, its drowned out by white noise. Definitelly doesn’t look like a meaningful trend…

            Let’s talk more about how awesome New England is.

  4. New England is absolutely lousy with colleges and universities, which unlike other “industries”, are experiencing no slump in business. They can employ a lot of people.

    And as MikeP said, the industries that are in New England are the kind that stay there and very rarely leave (for various reasons).

    So there isn’t a lot of change going on, which is classic New England.

    1. University endowments were hit hard by the financial crisis. They’ve been shedding workers just like everyone else.

      My office trash can is currently emptied once every two weeks. If I want to throw out anything which rots I have to walk all the way to the other end of the building.

      1. The medium-sized university I teach at here in N.H. has had, for the past two years, the largest enrollment in their history (both international and domestic students). We’re hiring faculty left and right….well mostly “left,” but you get what I’m saying. Granted, most of them are adjuncts, but that’s how it works in many disciplines nowadays.

        1. I bet they’re replacing retiring full-time faculty with adjuncts though.

          Trying to find a job in academia is fierce these days (even more than it was in the past). I laugh when someone complains that academics have been shielded from the harsh realities of competition in the real world.

          1. I bet they’re replacing retiring full-time faculty with adjuncts though.

            It’s been that way for a while, though, hasn’t it? I certainly remember a lot of complaining from the people I went through grad school with that schools were focusing on adjuncts because they were cheaper. Of course, this was right after the dotcom bubble popped, so maybe there’s a correlation between profs getting tenure and schools relying on part-timers instead.

      2. If I want to throw out anything which rots I have to walk all the way to the other end of the building.

        That must be very inconvenient when dealing with the dead coeds you have in your crawlspace.

        1. Why would I want to throw them away when they’re still usable for a week or two?

          1. I still think peanut butter isn’t going to work to preserve them, but whatever.

            Also – we actually have our trash emptied every day. So long as everyone in the office puts it in the “communal can” in the break room.

      3. and yet, universities have relentlessly raised tuition for the past decade, seemingly without question. Story after story details student debt and the cost, but no one ever questions why it keeps rising. No other industry could get away with such huge spikes in its price structure year after year, but no one seems to notice this particular elephant.

        1. Most of the tuition raises are to cover the costs for stuff like this.

          1. no wonder kids take longer and longer to graduate.

            1. Yeah, college, especially within the past 15 years, is mostly just an excuse to delay adulthood at much inflated prices, away from mom and dad, where the opposite sex is hopefully abundant. During my four years of engineering school, I kept wondering if it would have been a better investment to spend the loan money on renting some cheap ass apartment in Bumfuck, playing video games all day, watching porn, and eating Ramen instead of actually wasting my time going to classes, however challenging, that I wouldn’t be able to use (since I’m a dumb shit). Several years of trying to find a “real” job based on my “education” while doing complete bullshit has given me my answer…..

              Fuck, where are my pills?

        2. That’s what’s so ridiculous about the demands of the occupywallstreet goons to have their student loan debts forgiven. They simply can’t understand that the banks have worked hand-in-hand with the schools and government to keep inflating tuition to the skies, because they bought into the lie that “any degree” will guarantee them a seat at the Big Kids table.

          Tuition has risen at four times the rate of inflation over the last 30 years–that’s a faster rate than health care costs, yet no one is trying to make tuition cheaper, just hollering that we need to cram more kids (with increasingly worthless math skills, just look at Tony and “Tshirt” on the Poverty thread) into the college debt grinder.

          If these libarts majors wanted to protest being up to their asses in debt, they’d start right on their own campuses in front of the Dean’s office. But they’re too brainwashed by the educational complex to understand the basic math, and the unique parasitical relationship the banks and schools share with the government.

        3. and yet, universities have relentlessly raised tuition for the past decadefifty years

          Seriously, the average college tuition costs have been rising faster than inflation since the mid-late 50s.

          Here’s a chart for 1978-2008: Link.

          Here’s a chart for 1985-2010: Link.

          I couldn’t find one stretching to the 50s quickly, but that should give you an idea.

      4. They’ve been shedding workers just like everyone else.

        Not if you talk to an actual employee.
        Faculty gets let go, but at places like Harvard the rest of the staff is unionized and basically have jobs for life.

        I think the northeast is just subject to the dishonesty of the stats in the first place. Nobody counts in UE stats until they actually get a full-time job first; If you’re 28 and never had a full-time job, you aren’t unemployed. It may be that if you’re first full-time employment was contract-based you don’t count as UE when your contract is up. So maybe the NE is just loaded with part-time and contract workers. With all the imported labor (aka college students with massive loans) there might be a disproportionate amount these.

  5. How can anyone not like clam chowder…? Especially when it’s in a bread-bowl?

    1. Is that clam chowder? It looks like cheese soup to me.

      1. New England clam chowder is white and creamy and delicious, versus stupid Manhattan clam chowder which is tomatoeee and wateree and all around suckee. Does anyone know where to get good New England clam chowder in Manhattan? It’s one of the things I miss the most.

        1. That clam chowder in a bread bowl looks delicious.

          1. The cheerleaders look delicious too.

    2. It’s Tim. And he lives in California. He probably doesn’t even know all the kinds of chowder. New England…Manhattan…Rhode Island…and the other ones made by Southerners.

      1. …and the other ones made by Southerners.

        Coca-Cola Chowder?

        1. that’s co-cola, thank you, and don’t knock it till you try it. With a nice side of grits, a biscuit, and some sweet tea, enough to make the food police burst a blood vessel, and that’s before eating it.

        2. Chowder Gravy.

      2. Manhattan clam chowder is no clam chowder at all.

        My preference is Rhode Island’s style, though to be honest I never knew it was called that. We just call it clam chowder.

  6. New Hampshire has a lot of other things going for it. Too many to list here.

    http://freestateproject.org/101Reasons

    1. I’m not believing in NH until they get control over their southern border. A fence would be a good start.

      1. My family that still lives there would be in complete agreement with this.

  7. And what’s the federal minimum wage? $7.75?

  8. Obama is shipping American jobs to New England!

  9. you lost me when you referred to $8 and some change as a ‘high’ wage.

    1. It’s OK if you’re lost; someone might look for you, but we won’t.

    2. It used to be $4.25 on the federal level back when I was in high school; of course, I remember things being a lot cheaper back then too.

      But I’m sure increasingly rising wages and the high price of consumer goods have no coorelation at all, nosiree.

    3. Where was that, exactly? I see “high minimum wage laws” but not “high wage(s)”.

  10. New England, traditionally, has had a diverse economy; a little agriculture, a little manufacturing, a little service/information-age.

    Stockbrokers call it “diversifying your portfolio,” we call it “not putting all your eggs in one basket.”

    1. Oh, I forgot. BEA Systems, Raytheon, and Sikorsky all have a large presence in New England.

      They’re in the killing business, and business is a-booming.

      1. Don’t forget Electric Boat, Pratt & Whitney, United Technologies, Winchester, and Colt (plus a bunch of other firearm companies through the Gun Belt), all in CT alone, besides Sikorsky. All defense contractors.

      2. Yep. Had an aunt who worked at Raytheon. Also, you forgot Sylvania.

  11. Everyone in Connecticut gets on the train every morning and commutes to NYC. OK, and there’s Yale and stuff.

    1. And a bunch of insurance companies in Hartford.

      Of course, they haven’t been hiring too many people for a while.

  12. The min wage in WA is about to go up to just over $9 and change.

    1. That’s sure to fix their high unemployment rate. Sort of like how all the new regulations on small business that Obama is proposing in his jobs bill will encourage them to start hiring again.

  13. Are these minimum wages adjusted by cost of living? I would imagine that the minimum wage in New England is effectively lower than a lot of the rest of the country when you look at what it buys you. Though I have no idea what that implies macroeconomically.

  14. I have to admit, Nevada’s 13.4% unemployment is kind of a shock. It is, in other ways, a very business-friendly state (no corporate income tax), and they resist nannyism (smoking bans, prostitution bans) that other states go for hook, line, and sinker. Are there layoffs in Vegas?

    1. I’m just an idiot lawyer, so this is pure conjecture on my part, but wasn’t Nevada booming in the ’00s? I know they were hit hard by the housing bubble. It seems logical to me that if they attracted a lot of people ten years ago with cheap housing and a booming economy that they would be hit hardest when everything collapsed.

    2. Gambling is probably the first piece of optional spending that one should cut. Consumers, thus, acting rationally, aren’t going to Vegas like they used to.

      1. ^This.

        Las Vegas is just a more glittery version of the Rust Belt steel towns; their economy is almost entirely dependent on a single industry that relies on people spending large amounts of disposable income. That’s a basically a single point of failure in a severe economic downturn.

    3. Don’t forget the crimp Obama put on the Convention business when he started to complain about how much money corporations were spending on training seminars and awards parties in places like Vegas.

  15. I really enjoyed the pictures of the Breadbowl of soup and the superfit cheerleaders. Great article!

  16. High minimum wage, high unemployment… add high inflation (coming soon!) and you’ve got a trifecta!

  17. We all know there ain’t no Negros in New England. It’s too damn cold for them. The Negro don’t like the cold. If there ain’t no Negros, unemployment will be low, and therefore, taxes will be low.

    For a magazine called Reason, you guys are as dumb as fuck.

    1. We sure are – there’s no way we can handle and intellect like yours. So why don’t you go crawl back to whatever shithole you crawled out of and go chat with all your brilliant pals.

  18. Pick a New England state — let’s take Vermont. Pretend like you want to move there. Jump online and start looking for a job and somewhere to live. I think you’ll find your answer: the jobs are not terribly plentiful, you won’t get much house for the money, and taxes are high (except NH, which does have high property taxes). On top of all that, it’s cold as rip.

    You’ll find yourself saying things like, “…but in Dallas there are so many jobs and look at the house I can get!”

    Now imagine that you can only make minimum wage and you find yourself in Vermont. I imagine a Greyhound bus would be in your future.

    1. I went to college in Maine. I couldn’t wait to get the fuck out of there. Dark, cold, and depressing.

    2. Dallas is ugly and hot as fuck. I’ll take Vermont any day. And the winters in Vermont are fucking awesome. The only dank and depressing time up there is March, when the skiing is winding down and the mud covers every surface.

      1. Sure they are great for a ski weekend. Try driving to work every day in that shit from November through March.

  19. *cleans monacle*
    We are the 1%ers

    1. You clean your own monocle? Are you sure you’re a 1%er?

  20. Easy. We left the laybah foace because owah Sawx choked outta the layoffs! We was so fackin depressed!

  21. The main factor is that New England, as a whole, is post-industrial and has been for decades. It’s somewhat like Western Europe (think Germany, or more germanely, Olde England) in that, especially when you consider that what industry is left is mostly of the high-skill, high-value variety. Otherwise, it’s all high-value services (health care, education, finance, law, etc.), where minimum wages have basically no effect. Also consider that population growth is pretty anemic, so there isn’t a lot of construction work even when times are good, so there’s no construction-related unemployment when times are bad.

    Joel Garreau, 30 years ago:

    EAST OF THE GREEN MOUNTAINS, under a bridge that carries the main street of the town of Randolph, Vermont, over the Third Branch of the White River, lies a small mill.

    With the words SARGENT ROUNDY CORPORATION fading on its smokestack, the place might seem to be abandoned. There are many deserted factories in this beautiful land, much of whose industry has seen hard times for a century. But even from a distance, walking down the steep, hairpin turn that leads from the bridge to the river’s edge, one can see hints that the place, though ramshackle, is not empty.

    In the yard are great stacks of twelve- and fifteen-foot-long logs, piles of three-foot-wide tree-trunk rounds, heaps of irregularly shaped slabs, and cords of tarp-covered firewood. They suggest that the place has been made into a sawmill, and, indeed, the distant whine of ripsaws can be heard. But those sounds turn out to have nothing to do directly with the felled trees. The tools are actually being used to expand the old mill – to increase the size of a showroom.

    Inside the decaying, shingle-covered building, the windows are covered with plastic; pink fiber-glass insulation pokes through an occasional hole in the wall; the mood is of bustle barely under control.

    It’s the kind of purposeful chaos that can be invigorating if one is young enough not to find it maddening. And the crowd swirling through the cramped quarters is definitely young. A girl with a jeweled pin in her nostril, wearing a floor-length skirt, sweeps around one corner just as two dogs explode out of an office and, at a dead run, bang through the side door toward the river. The sounds of thump, clang, and grind fill the air with a resonance that seems to belong to the past.

    Baskets of gray metal parts are heaped on shelves, where workers quickly select what they need, and have at them with grinding wheels throwing off orange streams of sparkles. Down the line, a young man with a pony tail sprays black paint at a finished assembly, after which nickel-plated controls are attached. In a side room, artists are making wooden models of proposed new products, which will be converted to aluminum master molds that will then be translated into iron.

    Away from the noise of metal on metal, in a space no larger than a good-sized living room, a bank of perhaps a dozen telephone cubicles has been set up, the partitions between them fashioned of two-by-fours that are still exposed, no attempt having been made to cosmeticize them. A box of apples and a large bag of doughnuts sit near a beat-up wood-burning stove at the center of the room. It is throwing out strong heat. The conversations of the folk on the long-distance lines are of chimneys, drafts, thermostats, combustion efficiency, and dampers.

    But the conversation always comes back to wood. For this is the headquarters of one of the biggest employers in central Vermont, and certainly the fastest-growing. It’s Vermont Castings, makers of arguably the finest air-tight cast-iron wood stoves in North America. In less than five years, Vermont Castings has gone from nothing but one impoverished yet curious tinkerer freezing his butt off, trying to figure out how to stay warm, to an operation employing hundreds, selling more than fifty thousand. stoves a year at prices that can approach $600 apiece. The White House, in order to demonstrate its commitment to energy independence, bought six.

    In its display of such Yankee virtues as ingenuity and :shrewd trading, and in its ability to take the liability of Vermont’s cold winters and dependence on imported heating oil and turn it into a sparkling asset, Vermont Castings is a fascinating display of the contradictions that make New England so distinctly one of North America’s Nine Nations.

    At first glance, New England’s future is bleak. That becomes clear in a study done by the National Center for Economic Alternatives. The results, based on per capita income figures, adjusted state by state for differences in cost of living, are startling. The poorest of the United States is not Mississippi; it’s Maine. Vermont is third poorest. Rhode Island, eighth. Except for Connecticut, with its New York bedroom communities that are not part of this land, no state in New England comes anywhere near being in the top two-thirds in wealth.

    The argument has been made that if North America had been settled from west to east, instead of the other way around, New England would still be uninhabited, and there’s something to be said for this theory. It’s only inertia, for example, that preserves any commercial agriculture in New England. The standard story about the Vermont dairy industry is that it is trying to breed a cow whose left legs are two feet shorter than her right so that she can negotiate the slope of her pasture. You can recall that during the Vietnam War, then-Senator George Aiken, that quintessential Vermont Yankee Republican, suggested that the way to disengage from the conflict was merely to announce that the war was over, declare a glorious victory for the United States, and leave. In Washington, that has long been regarded as a typical New England solution. It’s no more eccentric than making a declaration that all those Yankee acres of rock and clay, with their fourmonth growing season, are actually farmland fit for plowing.

    Not only is New England unblessed agriculturally, but it has precious little raw material and, with approximately thirteen million people, a diminished population. Long ago the texile manufacturers moved to Dixie, with its plentiful cotton and cheap labor. The iron-makers moved to the Foundry, where the ore and coal were. And, in general, industry continues to march west – partly because it’s easier to distribute goods from a central point on the continent than it is from, say, Manchester, New Hampshire.

    The most critical point, though, is that New England lacks the oil of MexAmerica, the thundering cascades of hydro power found in Quebec and Ecotopia, and the uranium and synthetic fuel stocks of the Empty Quarter. Except for its proximity to the fishing riches of the Georges Bank, New England has sparse resource assets – apart from the remnants of an industrialism that derived from the historical accident of first settlement.

    Paradoxically, the scenery and the surroundings have become New England’s primary asset. New England is rapidly transforming itself into North America’s first truly twenty-first-century, postindustrial society, and, as such, it is again a land of pioneers.

    Says one Boston banker, who thinks that New England’s economically stable state is a euphemism for stagnation, “We don’t have any theories about what you do when you reach this state of economic maturity. The finest brains have been telling us how to grow. Nobody seems to know what to do when you get grown.”

  22. I would call the minimum-wage/joblessness correlation real but not overwhelming.

    You could call it that, but it wouldn’t make it so. More importantly, the effect size would be so small that I don’t think it makes it as “whelming” let alone overwhelming.

  23. I read most of the article, then I had to go back and re-read a paragraph once I hit the words “coma-inducing.” Apparently I zoned out as soon as I saw the words New England.

  24. Unemployment numbers are comprised of those that are in the job market for the past 30 days. It does not include those that have not been in the job market in the last 30 days: people who have given up looking; those that have gone off unemployment because it has run out. One solution to unemployment is “High Speed University” check it out

  25. W.r.t. the “puzzle” B.T.Reynolds, above, is on track, I think. There is a joint endogeneity of unemployment rates and migration decisions. And any analysis should account for differing levels of human capital among potential workers and the differing demands for skills among potential employers. Particularly if linking minimum wages to unemployment levels. Dynamic areas can experience elevated unemployment rates, especially among the lower skilled laborers, as it draws in job-seekers. Milder climates and lower cost for the market baskets of the lower skilled and young would enhance this effect. Regions with lower probability of finding employment tend to shed job-seekers, decreasing the denominator for the unemployment rate. Big econ lit on this. Finally, minimum wage levels are themselves not exogenous here. Politicians are not entirely random, but have an eye to their actions. Moreover, the state-level minimum wages we observe are likely reflecting to some extent the former dynamism, or lack thereof, of regions.

  26. Is the point of this post that high minimum wage has a positive correlation with soup (clam chowder, I guess) and babes? Because if so, I’m totally down with it.

  27. It may well be that minimum wage has less effect where a good percentage of jobs are independent contractor-type positions. Once you get outside the cities, it is quite common for workers to have multiple jobs, many of them free-lance or some form of self-employment. Caretaking vacation homes provides a lot of work in Vermont, for instance, and most of that is done on an independent contractor basis. It is almost a cliche that to survive in Vermont, you either have to have outside money or work multiple jobs.

  28. Malloy has beaten Christie!!

    Ct is the most taxed state!!

    High min wage is loved by gov’t pay check cashers

  29. Hey, some of us get bored hearing about California every day too!

  30. The eight highest unemployment states (and DC) and their minimum wages:

    1. Nevada (unemployment 13.4%; $8.25)
    2. California (unemployment 12.1%; $8.00)
    3. Michigan (unemployment 11.2%; $7.40)
    4a. South Carolina (unemployment 11.1%; $7.25*)
    4b. District of Columbia (unemployment 11.1%; $8.25)
    5. Florida (unemployment 10.7%; $7.31)
    6. Rhode Island (unemployment 10.6%; $7.40)
    7. North Carolina (unemployment 10.4%; $7.25*)

    *federal minimum

    That’s what we call “no correlation”.

    1. Wait, doesn’t Reason have a foundation full of researchers? One of them should take the unemployment rate and minimum wage of the states and DC and do a correlation analysis. It should take them about 20 minutes.

  31. I think the relatively low unemployment numbers for New England are illusory. It does not reflect actual economic productivity. Rather, businesses are forced to hire a certain number of people just to offset the vast quantities of folk who are axe-murdered, drowned in blood, driven insane by exposure to other-dimensional evil, sacrificed to elder gods, or devoured by razor-toothed clown-monsters. (I have only been to New England once, but I am somewhat familiar with the works of Stephen King and H.P. Lovecraft.)

  32. A high minimum wage is less damaging in a state that already has a high median wage. Those are three of the highest median income states in the US.

  33. Someone should compare “real” employment rates to minimum wage rates and exclude New England. Does anyone know a good source that lists the real employment rate by state?

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