Kennedy Minimum Wage Hike Hurts Employees with Least Skills Says Employment Policies Institute

  • Publication Date: July 2003

  • Topics: Minimum Wage

The Employment Policies Institute (EPI) warned Congress today that a proposed minimum wage hike from $5.15 to $6.65 an hour would heat up the competition for entry-level jobs, resulting in the least skilled employees being replaced by more highly skilled workers.

In the latest Department of Labor figures for June, 2003, African-American unemployment is at 11.8%, 84% higher than the average; leisure and hospitality unemployment is 8.6%, 34% higher than the average; and teen unemployment stands at 19.3%, 202% higher than the average. This indicates the most vulnerable workers are finding minimum wage jobs hard to get now.

An EPI study by Dr. Kevin Lang of Boston University analyzes the displacement factor of federally mandated wage increases on less-skilled workers by more highly skilled workers seeking a more competitive wage. “The competition from higher quality workers makes low-skilled workers worse off,” Lang stated.

Kristen Eastlick, Director of Policy Analysis at EPI said:

“Right now, minimum wage workers are already suffering from high unemployment. Faced with the increased labor costs a minimum wage hike will bring, employers will have an incentive to hire more skilled, better-educated workers and pass over those with fewer skills.

“U.S. labor economists, minimum wage proponents and critics overwhelmingly agree that minimum wage increases result in low-wage workers being replaced by those with more skills as higher wages encourage more highly skilled people to apply for those jobs, and employers to hire them.

“When unemployment for workers with the least skills is increasing at a $5.15 an hour rate, raising it to $6.65, as Senator Edward Kennedy (D-Mass.) proposed Friday would put even more vulnerable employees at risk of losing their jobs to more highly skilled workers.”