Minimum Wage Boost Wouldn't Hurt Job Growth: Study

Raising the minimum wage wouldn’t cripple job growth and hurt businesses like some conservative groups have argued, according to a new study. To the contrary, it could pump money into the economy and reduce turnover in low-wage positions, the researchers found.

The current federal minimum wage is $7.25, or about $15,000 a year for a full-time job. Until 2007, the minimum wage had been set at $5.15 for over 10 years. Seventeen states currently have a minimum wage set higher than the federal standard, and a number of states are considering giving their standards another boost. The food and retail industries often fight such hikes, arguing that higher wages discourage growth, particularly in down economies.

Sylvia Allegretto, an economist at the University of California-Berkeley and the study’s lead author, believes those concerns are unfounded.

“A lot of people say we can’t increase the minimum wage during recessions because it’ll have this big negative effect,” said Allegretto, whose study was published in the journal Industrial Relations. “We didn’t find that -- in general, or when there were recessions.”

Researchers, who focused specifically on teen employment, looked at every federal and state minimum-wage raise over the last twenty years, including during the recession from 2007 to 2009, and found that the effects of wage raises on job growth and unemployment didn’t change with the business cycle. Allegretto said a lot of the benefits of higher minimum wages tend to be overlooked -- like higher morale and productivity, and less time spent searching for workers and training them.

Advocates of a minimum-wage boost often argue that the extra income for workers functions a lot like unemployment benefits or food stamps, in that it’s money pumped immediately back into local businesses. Jen Kern, who runs the minimum wage campaign at the National Employment Law Project, says a wage hike “could provide a boost to families and the economy, putting money into the hands of people who have no choice but to spend it.”

According to the Bureau of Labor Statistics, 1.8 million of the country’s 73 million hourly-paid workers were earning the federal minimum wage during 2010, with another 2.5 million earning even less than that. Minimum-wage earners tend to skew young, with workers under age 25 accounting for roughly half of those making the minimum wage or less.

Kern says if the minimum wage had kept pace with inflation since it’s peak in the 1970’s it would now be over $10. A survey conducted last year by the Public Religion Research Institute found that roughly two-thirds of Americans supported raising the federal minimum wage to at least $10 per hour.

Comments

[Brett Green]

05:16 PM on 06/07/2011

Not about theories (i.e. trickle-down economics) but facts... minimum wage increases have no impact on the number of jobs even in a recession:

Researchers...looked at every federal and state minimum-wage raise over the last twenty years, including during the recession from 2007 to 2009, and found that the effects of wage raises on job growth and unemployment didn’t change with the business cycle

[JRNO]

02:14 AM on 05/03/2011

Anyone one has ever had employees can tell you that some people are not worth even $5.00 an hour. An employee must produce more than his compensation to stay employed. Other things being equal, using the force of government to arbitrarily raise the pay of an employee will not make him more productive, it will only increase the costs to the employer and put the employee's job in jeapardy.

[ScarletOpinion]

06:59 PM on 06/07/2011

Anybody with an employee who is not worth $5/hour needs to find a new employee. I know that's not always realistic - I worked in retail management for 8 years. But if the employee is really that bad, they don't need to work for you.

With a few exceptions, of course. I made a policy of hiring at least one person who was mentally handicapped. They often did not earn their pay (they couldn't) but they were worth having there, and having them there gave them a future.

[JRNO]

10:39 PM on 06/10/2011

Exactly. If the minimum wage is more than the employee can produce he will not get hired or be fired. The government can not force you to hire someone that you think will result in a lower net profit. Hiring someone who may not fully earn their pay is a voluntary expense that you may choose to do for other reasons.

[SusPiShus]

09:02 PM on 06/07/2011

Anyone who can say "that some people are not worth even $5.00 an hour" needs to try to make it on that much money today. If that is how you feel about people, I'm not surprised that they don't "produce" for you.

[JRNO]

10:20 PM on 06/10/2011

Feeling has nothing to do with it, an employee who is prone to mistakes or too slow can cause idleness to many other employess down the line and quickly negate his pay.

[QolourCouture]

11:49 AM on 04/28/2011

Cashier with computer exp?I'm I reading this right?this cannot be America ....

[Jim Anderson]

09:04 PM on 04/27/2011

Tie the minimum wage to congressional salaries. If congress gets a 10% raise, the minimum wage goes up 10%.

[Genosse Joe]

01:57 PM on 04/27/2011

If we would set up the minimal price of gasoline at $6 per gallon it would not hurt the growth of economy.

Current economy proves it. Gas prices are growing and economy (the real one, not the monopoly money pumped stock market) is going down at the same pace.
It will not be worse, or would it?

[Conservador-Rebelde]

12:40 PM on 04/27/2011

The article may be right, "Minimum Wage Boost Wouldn't Hurt Job Growth," but it certainly won't help it. Raising minimum wage means that employers will either lay off people that aren't pulling their weight, or they will expect to transfer those additional costs on to their consumers. If people want jobs created, they need to expect that many of them will be low-wage jobs.

[mun15ey23]

01:01 PM on 04/27/2011

Isn't that what businesses are doing right now? Laying of people who aren't pulling their weight? Transfering additional cost on to their consumers? Remember when soda and candy use to cost $.50? The increase in price is due to the businesses desire to increase their profits. Which is not wrong...but not at the expense of Americans. They do not care about the American People, just their investors.

Why should people expect low-wage jobs? Because Big Corporation has slowly decreased what they pay in order to increase they profits and satisfy their shareholders. I use to work the the big box home improvement store...8 years ago, they offered $13 starting, with pay differental for people working over-night inventory. Now? You'll be lucky if you make $8 an hour. What's up with that?

Minimum Wage Boost will help the economy because the more $$ consumers have, the more they will spend. Maybe not for luxury items (Car, TV, Bling-Bling), but the necessity, clothes, food, etc.

[Conservador-Rebelde]

01:12 PM on 04/27/2011

Why should people expect low-wage jobs?

Because the labor people do is not as extensive as it used to be... whether it be actual physical labor, or mental labor. With the increase of technology, each individual is doing less than they used to. Those jobs where the labor is relatively the same, (many construction jobs are still competitive to where they used to be), you can expect that the laborers will earn above the minimum wage mark anyway.

Think about it: 20 years ago, inventory management at a retail store was very involved. Now, any joe-schmoe can walk around and beep a scanner and someone in management tracks the results. Why should the joe-schmoe be paid the same as 20 years ago, when he is hardly doing anything?

[Genosse Joe]

01:57 PM on 04/27/2011

"Minimum Wage Boost will help the economy because the more $$ consumers have"

Where would consumers get more money if many of them will be fired?

[mun15ey23]

12:36 PM on 04/27/2011

Prices of merchandise and goods have gone up regardless if the minimum wage level was increased. So prior to 2007, for 10 years minimum wage was at $5.15 and did you see the increase? I sure did...Corporations are only in it for the $$, as they take jobs overseas it only increase their profits by double, triple, or quadruple! It has only fueled more coruption in our government (because of lobbyists and special interests) as well as Wall Street...open your eyes...

[Cougar31]

07:57 AM on 04/27/2011

Wonderful! Higher prices for all the rest of us! Yaaaay!

[CPA 4 Life]

03:40 PM on 04/26/2011

If you are over 23 and need a federal law to earn more than $10 an hour you lack marketable skills.

[beesknees08]

03:44 PM on 04/26/2011

Have you tried applying for a job recently? The competition is rough - your statement might have held true 10 years ago but it most certainlly does not now. Take a look around you.

[oilfield]

07:38 PM on 04/26/2011

i agree....one must acquire more marketable skills than fry cook....

[StopMakingSense2]

03:10 PM on 04/26/2011

Who you going to believe? Republicans or some elitist egg heads. Who would place knowledge and reason over dogma? A republican would never stoop that low..

[beesknees08]

03:10 PM on 04/26/2011

Haha, oh you're funny.

[Kiffanik]

02:45 PM on 04/26/2011

I still don't get how we think people can survive on $7.25/hour and actually be contributors to our economy. Heck, with current gas prices, for $7.25/hour it's almost more cost-effective to stay home and collect unemployment depending on where the job is located.

[CPA 4 Life]

03:31 PM on 04/26/2011

I still don't get how we think people cannot survive on $7.25/hour when they are in high-school living under their parent's roof and eating off of their parent's table.

[pdxist]

05:50 AM on 04/27/2011

The majority of minimum wage earners is 25 and over.

[Seymoreclearly]

06:12 PM on 04/28/2011

Man, you are just not a very nice person. You assume a lot. Karma is a beeyotch, hope she never catches up to you with that kind of mind & heart. Or 'scuse me, no heart.

[oilfield]

07:39 PM on 04/26/2011

minimum wage isnt supposed to be a permanent position in life.

[Seymoreclearly]

06:13 PM on 04/28/2011

Another winner.

[beesknees08]

01:09 PM on 04/26/2011

If we raise min. wage then the people who are stuck working in these low paying jobs might actually be able to go out and buy things. Think of it as a trickle down effect, conservative groups.

[StopMakingSense2]

03:14 PM on 04/26/2011

You misunderstand trickle down. It's working perfectly. A tsunami for the top 2% and a trickle for everyone else. The original slogan was going to be crumbs from the table but was deemed too to the point. Is your trickle too big? Republicans love to fix that sort of thing.

[beesknees08]

03:22 PM on 04/26/2011

Oh silly me. I forgot to check behind me - I had a whole sack full of trickle down cash that I had placed behind my sofa only two days ago. Gosh, I hate it when my trickle down fun bucks get away from me! I'm always tripping over riches from the upper crust. When will the middle class bonuses stop!

[Conservador-Rebelde]

01:05 PM on 04/27/2011

Go out and buy what? Everybody will raise their prices to make up for what they have to pay in increased wages. Their dollar will be worth less, in effect. You could think of it as inflation... paying them more will give them more dollars, but everybody will raise their prices in dollars. They will be exactly where they are.

And yes, raising minimum wage would have a vast effect on business, except maybe companies that produce things which have very little direct labor costs. (Many of these types of jobs already pay higher than minimum wage.) Everyone else would raise their prices to compensate for what they have to pay in extra direct labor.

[Agent672]

03:47 PM on 04/27/2011

so explain how CEO's making 200% more than they used to does not drive up costs....oh..it's only the low paid workers that add to the costs...i see.

[RaiseIllinois]

12:31 PM on 04/26/2011

Go to raiseillinois.com to learn more about the benefits of raising the minimum wage!

[silverstreet]

12:24 PM on 04/26/2011

It's a race to the bottom. The devaluation of American labor affects all of us.

[Talmageb]

11:30 AM on 04/26/2011

In response to livable wage question.

11.00 per hour is the national average number. The number is reached by figuring out how much it costs to rent an apartment in your area and making that 30 percent of your wage. Allowing for food costs, clothing, transportation, household essentials (toilet paper, toothpaste), medical care, phone, electricity, gas and other utilities to make up the remaining 70 percent. It is a reasonable method for computing a minimum wage in my opinion.

Many people making minimum wage or around minimum wage are hard working not highly educated individuals like my mother. She worked at Wal-Mart ofor ten years in OH. She was fired for getting written up for a third time in her ten year employment. her ending wage was 9.25 an hour. Not enough to support herself she collected welfare. She was immediately put on the rehire list so she could get her job back in 60 days. Of course she would have to reapply and start at, you guessed it, minimum wage. This is a matter of some urgency and should not be so easily dismissed.

[oilfield]

07:42 PM on 04/26/2011

so why go back....with a stable employment history she should be able to find better work. run an ad on craigslist for childcare....we pay 10.50 an hour plus taxes/workers comp etc for childcare 20-30 hours a week....i am sure there are folks in every city that need reliable childcare.....maybe get 2 customers.

[Talmageb]

08:03 PM on 04/26/2011

She took another job as a cashier down the way. This has been a couple of years. I posted this not to demonstrate my mother's inability to find or keep employment. The primary reason I share this is to illustrate that
A. Not all people working at or around minimum wage are high school kids or senior citizens.
B. A livable wage as the minimum wage is a necessary change to make in order to help people in my mother's situation who work hard and are consistently taken advantage of.
C. Given the opportunity multi-national corporations will do whatever they can to hold their lowest wage employees down as far as possible.

Thanks for the suggestions though. I appreciate your concern.