Minimum Wage

5 Things You Didn’t Know About the Minimum Wage

  1. For every 10 percent increase in the minimum wage, teen employment at small businesses is estimated to decrease by 4.6 to 9.0 percent.1
    •  According to the U.S. Bureau of Labor Statistics, teen unemployment averaged a record high 24.3 percent in 2009.
  2.  For every 10 percent increase in the minimum wage, estimates show employment may fall as much as 6.6 percent for young black and Hispanic teens ages 16 to 19.2
    •  African American teen unemployment averaged 39.5 percent in 2009, which is more than four times the national unemployment average and 26 percent higher than last year.
  3.  According to recent U.S. Census data, only 16.5 percent of minimum wage recipients are raising a family on the minimum wage. The remaining 83.5 percent are teenagers living with working parents, adults living alone, or dual-earner married couples.3
    •  Raising the minimum wage is an ineffective tool to fight poverty. Programs like the Earned Income Tax Credit are far better at helping low-income Americans.4
  4.  The average annual family income of those earning the minimum wage in 2009 is over $48,000.2
    •  One study found that only 10.5 percent of the beneficiaries of then-candidate Obama’s proposal to raise the minimum wage to $9.50 would come from poor families.4
  5.  Economists at the University of California-Irvine and the Federal Reserve reviewed the economic evidence and found a majority in support of “the view that minimum wages reduce the employment of low-wage workers.”5
    •  27 million Americans lack even the basic skills needed to fill out a job application.6 Minimum wage increases make it more difficult to hire and train less-skilled individuals like this.

Between July 2007 and July 2009, the federal minimum wage increased by 40 percent. A new study from Ball State University found there were 550,000 fewer part-time jobs as a result of this increase.

Federal policy makers allowed the wage hike to go through despite decades of research showing that minimum wage hikes take a sledgehammer to the entry-level job market. As employers are faced with higher labor costs, they hire workers who have more work experience or higher skill levels. This leaves unskilled applicants without a job, and without the invisible curriculum that comes with a first job experience.

References:

1 Sabia, Joseph J. (2006) The Effect of Minimum Wage Increases on Retail and Small Business Employment. Washington, DC: The Employment Policies Institute.

2 Neumark, David. (2007) Minimum Wage Effects in the Post-Welfare Reform Era. Washington, DC: The Employment Policies Institute.

3 Bureau of Labor Statistics. (2009) “The Employment Situation: June 2009” and EPI’s internal analysis of the Outgoing Rotation group Data Files from the Current Population Survey, June 2008-May 2009.

4 Sabia, Joseph J. and Burkhauser, Richard. (2008) Minimum Wages and Poverty: Will the Obama Proposal Help the Working Poor? Washington, DC: The Employment Policies Institute.

5 Neumark, David and Wascher, William. (2008) Minimum Wages.The MIT Press; Cambridge, MA. PP. 104-105.

6 National Assessment of Adult Literacy. (2003). National Center for Education Statistics; US Department of Education.

Press Releases / Op-Eds

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Studies

  • The Lasting Benefits of Early Work Experience

    The US labor market has recovered slowly but steadily in the years since the Great Recession officially ended in June 2009. But for young adults between the ages of 16 and 19, the recovery has been tepid at best: ...

  • Minimum Wages and the Business Cycle: Does a Wage Hike Hurt More in a Weak Economy?

    In his 2013 State of the Union address, President Obama called for an increase in the federal minimum wage to $9 an hour. The following month, Senator Tom Harkin (D-IA) and Representative George Miller (D-CA) introduced a bill to ...

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Letters to the Editor

  • Minimum Wage Hikes Don’t Help

    U.S. Rep. Gwen Moore's heart may be in the right place on the minimum wage, but the evidence is clear that minimum wage hikes actually harm the people they're supposed to help. ("Minimum wage raise urged," July 16). The economics ...

  • Pay Attention to Two Sides in Minimum-Wage Debate

    RE: "Time to raise the minimum wage?" (May 19): Economist Sylvia Allegretto claimed there is no link between minimum-wage hikes and job losses. What she didn't mention is that her research findings were disproven. Economists at the University of California, ...

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