Labor Day 2005: Five Reasons Not To Increase the Minimum Wage

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  • Publication Date: September 2005

  • Topics: Minimum Wage

Washington – As Labor Day approaches, the traditional pleas for a minimum wage hike come from those who do not understand or choose to ignore the negative economic consequences of raising the wage floor. As lawmakers on Capitol Hill and in many state legislatures consider increasing the minimum wage, the following are five very important reasons not to do so.

Minimum wage hikes actually harm those they intend to help – Contrary to popular claims that wage hikes will help the working poor, decades of economic research conclude that such increases actually lead to fewer job opportunities for minorities and low-skilled employees. Researchers at Duke University have found that after an increase in the minimum wage, low-skilled adults are often crowded out of their jobs as better-educated teenagers (frequently from wealthier families) are drawn into the workforce simply to earn spending money. Moreover, a Cornell University study found that black young adults typically bear almost four times the employment loss of their non-black counterparts after a minimum wage increase.

Wage hikes would further harm those facing disproportionate unemployment – While August’s overall unemployment numbers show a four-year low of 4.9%, minorities and the least-skilled members of society continue to face an exceptionally difficult labor market. Teen unemployment increased from 16.1% to 16.5%, while African American teen unemployment jumped to 35.8%–over seven times the national rate. For those without a high school diploma employment numbers stagnated at 7.6%. An increase in the minimum wage would only exacerbate the unemployment problem for these people. See www.GatewayJobs.com for more information.

Few employees are supporting a family on minimum wage – A new study conducted by Dr. Richard Burkhauser, Chairman of the Department of Policy Analysis and Management at Cornell University, provides a historical view of the effects of increases in the federal minimum wage on the working poor. Contrary to the statements of its advocates, fewer and fewer low-wage employees are supporting a family on the minimum wage and therefore, the most effective anti-poverty programs must concentrate on family income—not wages. See http://www.epionline.org/Burkhauser.

Wage hikes bear a high cost while going to very few of the intended beneficiaries – Senator Ted Kennedy’s (D-MA) proposed $7.25 per hour minimum wage bears an $18.26 billion price tag for the nation’s employers. Only 12.7 percent ($2.3 billion) of this cost will actually go to poor families, with only 3.8 percent going to poor single mother households, and only 3.7 percent going to poor African American families. See http://www.epionline.org/Burkhauser.

Most minimum wage employees see raises within a year — Contrary to the misperception that entry-level employees are stuck at the minimum wage, research from Miami University of Ohio and Florida State University shows that nearly two-thirds of minimum wage employees receive raises within 1-12 months of employment as a result of their tenure and increased skill.