New Study Finds Raising Federal Minimum Wage Would Eliminate Hundreds of Thousands of Jobs

Data Show Wage Proposals Would Do Little to Reduce Poverty
  • Publication Date: July 2012

  • Topics: Minimum Wage

WASHINGTON – Today, the Employment Policies Institute (EPI) released a new study examining proposals from Representative George Miller (D-CA) and Senator Tom Harkin (D-IA) to raise the federal minimum wage to $9.80. According to EPI’s analysis of recent Census data, a wage hike of this magnitude is projected to eliminate as many as 768,000 jobs for less-skilled and less-experienced employees.

EPI’s full study and executive summary are available here: http://epionline.org/downloads/EPI_TheImpactof980FederalMinimumWage.pdf

Analyzing Census Bureau data, the study finds that the legislation is poorly targeted to those in poverty. The average family income of a beneficiary of a $9.80 wage hike is $50,662—well above the $15,080 year-round income cited by proponents of wage hikes. The average family income figure reflects the fact that over half—nearly 57 percent—of the beneficiaries of a $9.80 minimum wage are either living at home with family, or have a spouse who also works. Less than 10 percent are single parents supporting children; over 40 percent are age 25 or under.

“The economic consensus on raising the minimum wage is clear, and these latest proposals are no exception,” said Michael Saltsman, research fellow at EPI. “ Instead of reducing poverty rates, a higher minimum wage reduces employment for the least-skilled jobseekers.”

Advocates for a higher minimum wage rely on a handful of outlying studies to make the case that a higher minimum wage has no effect on employment. Yet according to economists at the University of California-Irvine and the Federal Reserve Board, 85 percent of the most credible studies on the subject from the last two decades point to job loss following an increase in the minimum wage. Additionally, research from an economist at San Diego State University finds no link between increases in the minimum wage and a boost for the economy.

“Advocates claim that the minimum wage would be over $10 an hour today had it been indexed for inflation since 1968,” Saltsman continued. “But they’re cherry-picking their baseline: If the minimum wage had been indexed since its inception, it would be about $4 today.”

Economic research from Florida State University and Miami University shows that almost no one is stuck earning the minimum wage; in fact, two-thirds of minimum wage earners receive a raise in their first 1 to 12 months on the job.

Saltsman concluded: “If Congress wants to help reduce unemployment and jumpstart our economy, it should focus on lowering barriers to hiring, not raising them.”