Articles from the Employment Policy
Institute
Increasing Minimum Wage Won't Help
Jobless
Published In:
Duluth News-Tribune
Author: Craig Garthwaite
2/19/05
Some lawmakers are
hailing the proposed 36 percent increase in Minnesota's
minimum wage as a life preserver for employees struggling in
a stormy economic sea. But St. Paul's minimum wage bill
ensures that the thousands of low-skilled Minnesotans who
need entry-level employment opportunities will find it even
more difficult to keep afloat.
The statehouse ought to
remember that Federal Reserve Chairman Alan Greenspan
cautioned Congress just last summer against raising the
minimum wage. The chairman pointed out that such a move
"increases unemployment and, indeed, prevents people who are
at the early stages of their careers... from getting a
foothold in the ladder of promotions."
Once they're on the job,
minimum wage employees make dramatic progress up the pay
scale. Although proponents of Minnesota's proposed wage hike
often argue that minimum wage employees haven't had a raise
since Congress last increased the national rate, few
entering the workforce at the minimum wage stay there for
long. Nearly two-thirds get a raise within 1-12 months,
according to academic studies. After improving their skills
and establishing their value, these employees receive raises
at a rate nearly six times larger than everyone else -- all
without mandatory wage hikes.
A small group of the
least skilled may remain at the minimum wage for extended
periods. However, these low-skilled employees are most
likely to lose their jobs following a wage hike. Duke
University researchers have found that after an increase in
the minimum wage, the lowest skilled adults are crowded out
of their jobs as better-educated teenagers (frequently from
wealthier families) are drawn into the workforce. Their
"need"? Simply to earn money for video games and iPods. But
because they require less training, employers eagerly hire
these teenagers to get the most from their higher payroll
costs.
Businesses also adapt to
mandatory wage increases by turning to automation or
reducing service to their customers. Think this is unlikely?
Just look at the proliferation of ATMs and self-checkout
lanes at grocery stores. These new technologies, designed to
reduce labor costs, eliminate jobs in the process.
Because of disparities in
education, job losses often exact a crippling toll on
minority communities. Cornell University researchers have
determined that after a minimum wage hike, young
African-Americans bear four times the employment loss of
non-blacks.
Starting in 1948, the
earliest year data is available from the Bureau of Labor
Statistics, the unemployment rate for young black males
averaged lower than that of their white counterparts. But in
1956, a 33 percent increase in the minimum wage precipitated
an alarming turnaround. By 1960, unemployment for young
black males had nearly doubled to 22.7 percent while
increasing only slightly for young whites. By 1981, nearly
annual minimum wage increases had greatly contributed to the
40.7 percent unemployment rate for young black males.
Artificially high wage
mandates continue to price many less-educated
African-Americans out of the labor market. Today, the
unemployment rate for young blacks is 96 percent higher than
for white youth. Nobel laureate economist Milton Friedman
warned that joblessness among so many young blacks "is both
a scandal and a serious source of social unrest. Yet it is
largely a result of minimum wage laws."
Proponents of wage hikes
typically frame their efforts as a way to rescue society's
most economically disadvantaged -- a purportedly vast
underclass of single parents supporting their children on
just a minimum wage paycheck. But only 5 percent of
Minnesota's minimum wage employees fit that description. The
average family income of a Minnesotan who would benefit from
the proposed wage hike is more than $57,000.
In fact, a Cornell
University study found only 15 percent of prospective
wage-hike beneficiaries across the nation are in poor
families. Poverty is becoming a phenomenon confined largely
to those who don't work full-time (or don't work at all).
None of them will benefit from a minimum wage increase.
If lawmakers decide to
get serious about helping low- income Minnesotans stay
afloat, they can start by sinking their minimum wage
proposal.
Who, Really, Will Benefit from
Sen. Kennedy's $7.25 Minimum Wage?
Published on the EPI
website
Author: News release staff
3/3/05
Washington – As Congress weighs a hike in the federal minimum wage
to $7.25, Senator Ted Kennedy (D-Mass.) and supporters of an
increase suggest that the typical minimum wage employee is
struggling to raise a family on a single income. The
Employment Policies Institute (EPI) notes that U.S. Census
Bureau data strongly dispute this portrait as simply untrue.
Furthermore, the vast majority of the benefits of such an
increase will not reach its intended target—working
families.
An analysis of data compiled by the Census Bureau’s Current
Population Survey shows that the average family income of
employees who would benefit from a minimum wage increase to
$7.25 is nearly $42,000 a year. Why? Because fully 85% of
employees whose wages would be increased by this proposal
either live with working parents or another relative, live
alone, or have a working spouse. Former Clinton Labor
Secretary Robert Reich once summed up these findings by
stating pointedly, “After all, most minimum wage workers
aren’t poor.”
Additionally, the majority of potential beneficiaries do not work
full-time, and nearly 25 percent don’t even work 20 hours a
week. Fully half of all beneficiaries are 25 years old or
younger.
Just 15% of beneficiaries will be sole earners in families with
children, and each of these sole earners has access to
supplemental income through the federal and state earned
income tax credit (EITC). Research from Michigan State
University and the Federal Reserve found that the EITC is
far more efficient at actually helping those in poverty than
an increase in the minimum wage.
Of U.S. employees affected by the proposed $7.25 minimum wage:
· 41% of minimum wage earners live with a parent or relative · 21%
of minimum wage earners are a dual earner in a married
couple · 23% of minimum wage earners are a single earner
with no kids · Just 15% of minimum wage earners are single
parents with kids or a single earner in a couple with kids,
and each of these sole earners has access to supplemental
income through the EITC.
“If the goal of Congress is to help low-income working families,
then raising the minimum wage is a poorly targeted and
ineffective way of doing so,” said EPI’s director of
research, Craig Garthwaite. “The vast majority of benefits
will not go to poor families and the majority of poor
families will not receive a benefit.”
For a graphic representation of this data or to see figures for
individual states, visit
www.minimumwage.com
.
