Casey Mulligan: Wrong Again on Minimum Wage

In yet another attack on the minimum wage, New York Times Economix blogger Casey Mulligan argues that the failure of part-time employment to continue to increase at the end of 2009 is proof that the July 2009 minimum wage increase prevented 800,000 part-time jobs from being created.

But Mulligan’s reasoning is marred by two critical flaws that invalidate his argument. First of all, he attempts to use the employment of all part-time workers to evaluate the impact of the minimum wage increase, but only 11 percent of part-time workers made minimum wage in 2009. The vast majority of part-time workers are not minimum wage earners, so examining changes in the overall employment of part-time workers before and after the minimum wage increase is not a reliable indicator of how changes in the minimum wage impact employment.

The fact that part-time employment is an inaccurate proxy the for the impact of the minimum wage increase on employment is enough to derail Mulligan’s argument, but let’s continue to see how he further misinterprets the trends in part-time employment during the recession and recovery. Observing that the increase in overall employment among part-time workers halted and began to decline in the second half of 2009, Mulligan argues that the July 2009 minimum wage increase prevented employers from hiring more part-time workers. Because part-time employment declined at the end of 2009, he concludes that the rising cost of low-wage labor was the cause.

His graph:
Mulligan_part_time_employment_chart.png
However, attributing the stagnation in the number of part-time jobs to the minimum wage increase completely ignores the fact that part-time jobs were increasing from December 2007 to June 2009 because companies were cutting back on workers’ hours and millions of people previously holding full time jobs (34 hours or more a week) were facing hours cutbacks that turned their full-time jobs into part time jobs. Average weekly hours declined from 34.6 in December 2007 to a low point of 33.7 hours in June 2009. While minimum wage rose in July 2009 to $7.25, that same month was also the first month that average weekly hours began to increase again. The increase in part-time employment began to level off as fewer workers saw their hours cut and more workers had their hours restored.

See my graph below, which shows the sharp rise in part-time jobs coinciding with a precipitous fall in hours. As hours begin to increase back into the full-time range at the end of 2009, the number of part-time employed begins to fall:

Average_Hours_and_PTE.png
If you break down part-time employment into voluntary part-time employment (workers who indeed want part-time positions) and involuntary part-time employment (workers working part-time only because they are unable to find full-time positions), you will see that the increase in part-time employment from 2007-2009 was driven by involuntary unemployment— companies were slashing hours as the economy convulsed, and many more people were becoming involuntarily employed part-time as hours were cut.

Part_Time_Employment_Graph.png
Thus, the leveling off of the increase in part-time jobs at the end of 2009 is not a result of the minimum wage increase that affected only a sliver of part-time workers, but instead a result of the macroeconomic trend that employers were no longer dramatically cutting the hours of full-time jobs to create more part-time positions– they were actually beginning to expand hours. July 2009 was the first month the country was officially out of recession, and businesses responded by beginning to restore the hours of the workers they had.

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