Part of a series about the worst predictions of the year.
Last week we looked back at the worst policy and technology predictions of 2014. Today, we continue year-end series by reflecting on three equally terrible predictions about our economy.
Raising the minimum wage will stifle economic growth and cost jobs.
On January 1, 13 states raised their minimum wages as part of a larger nationwide effort—not only by progressives, but moderates and even a few conservatives—to help low-income workers who were struggling to make ends meet.
Still, such hikes were not without opposition. Notably, fast food companies sounded the alarm over the possible consequences of minimum wage hikes—namely, that consumers would pay higher prices and companies would be forced to cut jobs.
In California, which passed a minimum wage hike in 2013 that went into effect this summer, a spokeswoman for the state’s Chamber of Commerce told the Associated Press that the law would stymie job growth.
"We have it tagged as a job killer, given the increased costs businesses will be faced with," she said.
Six months after California’s minimum wage rose to $9, the state’s job growth continues to outpace nearly every other state in the country. In November, California added more than 90,000 jobs, its highest single-month total in almost two decades.
The Golden State is not alone. Of the 13 states that saw minimum wage hikes go into effect on January 1, all but New Jersey saw positive job growth in 2014. And as a group, those 13 states averaged significantly higher job growth than states that did not raise the minimum wage.
That doesn't mean job growth wouldn't have been higher without the minimum wage hike—we can't know the counterfactual. But it's clear that minimum wage hikes don't cripple state economies.
Allowing unemployment insurance to expire will be good for long-term unemployment rates.
At the end of 2013, one of the loudest debates in Congress was over whether to extend long-term unemployment benefits. Republicans argued that by allowing the benefits to expire, it would lead to a decline in the long-term unemployment rate.
Senator Rand Paul took to the op-ed pages of the Lexington Herald-Leader to explain his opposition to extending long-term benefits.
“There are currently 4.1 million Americans—37 percent of the unemployed—who have been without work for over 27 weeks, and research shows that extending long-term benefits will only hurt their chances in the job market,” he wrote.
Much of the research that Paul cited was written by Rand Ghayad, who was quick to set the junior senator straight.
“There is no evidence in my study, and almost no evidence elsewhere, that cutting unemployment insurance would increase employment much at all,” he wrote, adding that Paul “misread” his report on the matter.
And lo! 2014 has come and gone, and the rate of long-term unemployed has shown exactly no relationship to the loss of benefits. The unemployment rate had been falling at a steady pace for years even with 99 weeks of benefits, and in the last 12 months the rate of decline has not quickened—meaning that the upside of eliminating unemployment insurance for nearly 5 million people was a fiction, and families were left without a safety net.
Millions of jobs are at stake because of Obamacare.
At the very beginning of the year, Republicans got worked up over an incendiary report from the Congressional Budget Office that purportedly said 2.5 million jobs were at risk thanks to the Affordable Care Act.
Everyone from Senator Ted Cruz to the National Republican Congressional Committee seized on the report as proof of what they have been insisting since 2010: that Obamacare was a drain on the U.S economy.
The problem was that the report said nothing about losing 2.5 million jobs. Instead, the report found that a certain subset of workers could end up cutting back on their hours now that there was access to affordable health care, and that some employers might rely more heavily on part-time employees so as to avoid the penalty threshold for companies with more than 50 full-time employees.
Even that prediction appears to be overstated. A recent study from the Urban Institute concluded that, nine months since the insurance marketplace opened, there was little evidence that employers were hiring more part-time workers because of Obamacare.
There was some evidence of job losses related to the ACA in 2014, though: States that refused to expand Medicaid are expected to lose out on thousands of jobs and millions of federal dollars over the next several years. A George Washington University report estimates that North Carolina will lose out on 43,000 jobs by 2020, while a White House Council of Economic Advisers report said that rejecting expansion will cost Florida 64,000 jobs by 2016.
Meanwhile, the economy ended up doing just fine even as millions of Americans signed up for health insurance. Job growth is on pace to finish the year at the highest level since 1999, while GDP growth in the third quarter of 2014 was 5 percent, handily beating estimates from the Commerce Department and setting off yet another round of predictions: that the economy could be on the doorstep of a boom.