skip to main |
skip to sidebar
New Study Finds Minimum Wage Increases Hurt Low-Skilled Workers
From Charles Hughes of Cato.
"A new working paper
from the National Bureau of Economic Research finds that significant
minimum wage increases can hurt the very people they are intended to
help. Authors Jeffrey Clemens and Michael Wither find that significant
minimum wage increases can negatively affect employment, average income,
and the economic mobility of low-skilled workers. The authors find that
significant “minimum wage increases reduced the employment, average
income, and income growth of low-skilled workers over short and
medium-run time horizons.” Most troublingly, these low-skilled workers
saw “significant declines in economic mobility,” as these workers were 5
percentage points less likely to reach lower middle-class earnings in
the medium-term. The authors provide a possible explanation: the minimum
wage increases reduced these workers’ “short-run access to
opportunities for accumulating experience and developing skills.” Many
of the people affected by minimum wage increases are on one of the first
rungs of the economic ladder, low on marketable skills and experience.
Working in these entry level jobs will eventually allow them to move up
the economic ladder. By making it harder for these low-skilled workers
to get on the first rung of the ladder, minimum wage increases could
actually lower their chances of reaching the middle class.
Most of the debate over a minimum wage increase centers on the
effects of an increase on aggregate employment, or the total number of
jobs and hours worked that would be lost. A consensus remains elusive,
but the Congressional Budget Office
recently weighed in, estimating that a three year phase in of a $10.10
federal minimum wage option would reduce total employment by about
500,000 workers by the time it was fully implemented. Taken with the
findings of the Clemens and Wither study, not only can minimum wage
increases have negative effects for the economy as a whole, they can
also harm the economic prospects of low-skilled workers at the
individual level.
Four states approved minimum wage increases through ballot initiatives in the recent midterm, and the Obama administration has proposed a significant increase at the federal level. This study should give them a reason to reconsider.
Recent Cato work on this topic can be found here and here."
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.