Minnesota’s Proposed Minimum Wage Hike Harmful To Less-Skilled Employees And Welfare Recipients

  • Publication Date: April 2004

  • Topics: Minimum Wage

Washington — Efforts to raise Minnesota’s state minimum wage to $6.65 per hour would have devastating consequences for less-skilled employees and welfare recipients across the state, the Employment Policies Institute (EPI) warned today.

Dr. Peter Arcidiacono, a Professor of Economics at Duke University, recently studied the effects of minimum wage increases and found that individuals from low-income families “are hurt by a minimum wage increase as they are now competing with teenagers from wealthier families.” These wealthy teenagers are more likely to secure a job, decreasing employment opportunities for current minimum wage employees.

Decades of research from Michigan State University, Boston University, and the University of Wisconsin echo Arcidiacono’s findings that minimum wage increases would result in many of the state’s less-skilled employees losing their jobs to better-qualified applicants. “[I]ncreases in the minimum wage… raise the probability that more-skilled teenagers leave school and displace lower-skilled workers from their jobs,” a Michigan State University study concluded.

A minimum wage increase would also make it even more difficult for Minnesota’s welfare recipients to obtain and retain employment.

University of Wisconsin research has found that welfare mothers in states which raised their minimum wage remained on public assistance 44 percent longer than their peers in states where the minimum wage was not raised. The study found that this occurred because their skills rendered them unable to compete with better-skilled applicants attracted to the new higher wage, and with applicants who were more attractive to employers seeking to offset increased labor costs.

“By increasing the state minimum wage, the Minnesota Legislature will raise the bar even higher for low-skill workers and welfare recipients, leaving many more without job opportunities and dependent on welfare for as long as those benefits last,” said Craig Garthwaite, director of research for the Employment Policies Institute. “Hard evidence suggests a reality where the increase will deprive many of these Minnesotans of the only opportunity they have to earn a living and increase their earnings.”