Minimum wage hike would put low skilled individuals out of work

A new study commissioned by the Employment Policies Institute (EPI) in the U.S. on the impact of Missouri's ballot initiative to raise the minimum wage shows that not only would a hike put low-skilled adults out of work, but over 80 per cent of the benefits would go to families that aren't poor.

The study, conducted by labour economist David Macpherson of Florida State University, also found that the minimum wage hike would deliver a $44.4 million hit to Missouri businesses.

The resultant job loss translates to $15 million in lost income for affected employees.

Sadly, one-third of the over 1,500 jobs lost will be those of families earning less than $25,000.

This study reaffirms decades of economic research showing that mandated wage increases are a blunt and ineffective means of assisting low-income employees because of the simple fact that most minimum wage earners aren't poor. Specifically, Macpherson's study shows that:

Some 86 per cent of employees that will benefit from the hike either live with their parents, are part of a dual earning household, or don't have a family to support;

The average family income of who will benefit is over $46,000 a year;

Some 30 per cent of the benefits would go to families with annual incomes over $60,000 a year.

The mean net increase in income for families below the poverty level is only $23 a year.

"Minimum wage hikes are an ineffective anti-poverty tool and deliver a particularly harsh blow to the very people they are intended to help," says John Doyle, EPI's managing director. "A hike would not only cost jobs for Missourians with families to support, but over 45 per cent of the benefits would go to teens living at home."

Source: David Macpherson, The Effects of the Proposed Missouri Minimum Wage Increase Employment Policies Institute, August 2006.

For text: http://www.epionline.org/study_detail.cfm?sid=101

For more on Economic Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=17

FMF Policy Bulletin/ 05 September 2006