Employment for Minimum Wage Workers Falls by Over 10 Percent after Hike

States that Aggressively Expand Minimum Wage May Do More Harm Than Good
  • Publication Date: August 2010

  • Topics: Minimum Wage, Teen Unemployment

WASHINGTON – Today, the Employment Policies Institute (EPI) released a new study by economists Nicole Coomer of the Workers Compensation Research Institute and Walter Wessels of North Carolina State University that shows how increases in the minimum wage have a disproportionately harmful impact on those who work in minimum wage jobs.

“While raising the minimum wage is politically popular, the unintended consequences far outweigh the benefits,” said Michael Saltsman, research fellow at EPI. “This study shows that increases in the minimum wage erode the entry-level job market.”

Drs. Coomer and Wessels demonstrate that a 10 percent increase in the minimum wage causes as much as an 11.1 percent drop in employment for 16-to-19-year-olds working jobs that pay the minimum. For young teens aged 16 to 17 the employment loss is even higher at 13 percent.

A one page policy brief summarizing the study’s key findings is available here: http://epionline.org/studies/Coomer_Wessels_08-2010-brief.pdf

Total job loss is curbed by businesses not covered by the minimum wage; these businesses can offer alternative employment to those teen and entry-level workers shut out of a job by higher wage rates. But in states where the minimum wage has been raised or expanded beyond the federal level, fewer alternatives remain for teens—suggesting larger employment losses.

“Teens nationwide are facing an unprecedented 26 percent unemployment rate and are desperately in need of employers who can pay them a wage commensurate with their skills.” Saltsman continued. “This new research suggests that many state legislators were unwise to expand coverage of their own minimum wage beyond the federal level, leaving teens without an alternative.”

“There’s a cruel irony to this study’s findings: A higher minimum wage means fewer job opportunities for the young workers who traditionally fill minimum wage jobs,” Saltsman concluded.