Tags: minimum wage | low skills | workers | jobs | unemployment

UC Study: Minimum Wage Hike of 2007-09 Cost 1.4M Jobs

UC Study: Minimum Wage Hike of 2007-09 Cost 1.4M Jobs
Protesters demonstrate outside of a McDonald's restaurant, calling for a $15 per hour minimum wage, on December 4, 2014 in Chicago. (Brian Kersey/UPI/Landov)

By    |   Thursday, 11 December 2014 11:46 AM

Raising the minimum wage, a stated goal of the Obama administration, likely would cost jobs and hurt low-income workers.

University of California San Diego economic researchers
discovered that the federal minimum wage increase from $5.15 to $7.25 per hour between 2007 and 2009 actually cost the economy 1.4 million jobs, Breitbart News reports.

Even worse, the increase's negative effect landed squarely on the people it was designed to help — low-paid, unskilled workers, who found themselves blocked out of low-paid or internship positions that would give them a shot at gaining experience and achieving higher-paid jobs, the study notes.

"We find that binding minimum wage increases significantly reduced the likelihood that low-skilled workers rose to what we characterize as lower middle class earnings. This curtailment of transitions into lower middle class earnings began to emerge roughly one year following initial declines in low wage employment. Reductions in upward mobility thus appear to follow reductions in access to opportunities for accumulating work experience," the report states.

"While the wage distribution of low-skilled workers shifts as intended, the estimated effects on employment, income, and income growth are negative.

"We infer from our employment estimates that minimum wage increases reduced the national employment-to-population ratio by 0.7 percentage points between December, 2006, and December, 2012. This accounts for 14 percent of the national decline in the employment-to-population ratio over this period," the study's authors, Jeffrey Clemens and Michael Wither, state.

Breitbart noted that the Service Employees International Union has protested nationally, seeking an increase in the minimum wage, and Obama favors a 40 percent increase in the federal minimum wage to $10 per hour.

"The new research should give well-intentioned legislators pause before entertaining bills that would ultimately hurt low-skilled workers," Breitbart said.

Black Friday protests saw Walmart workers striking and conducting sit-in demonstrations along with the United Food and Commercial Workers Union, seeking an increase in the minimum wage to $15 per hour.

The protests led Walmart CEO Doug McMillon to announce that Walmart plans raising the lowest salaries it pays to some of its 1.3 million workers to above the $7.25 per hour federal minimum in the next few months, Forbes reports.

The National Review noted that while "Minimum-wage hikes are politically popular," and "They’ve long made intuitive sense to voters as a way to boost wages for less-skilled workers," the new study "gives us new reason to doubt the wisdom of an increase in the federal minimum wage."

"One consequence of this disemployment effect is that the displaced workers in question never had the opportunity to gain experience that might have otherwise allowed them to increase their long-term wages.

"The net effect was that even taking into account the positive impact of minimum-wage legislation on the wages of those who remained employed, less-skilled workers overall saw average incomes decline through the recession years as a result of minimum-wage legislation," the National Review said.

With the last increase in the federal minimum wage, the National Review states, "After a year, in the midst of rough economic times, the targeted workers found themselves 6 percentage points less likely to have a job, thanks to the well-intentioned efforts of the United States Congress."

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Raising the minimum wage, a stated goal of the Obama administration, would cost jobs and hurt low-income workers, according to the findings of University of California San Diego economic researchers, who looked at the impact of the federal minimum wage increase from 2007 to 2009.
minimum wage, low skills, workers, jobs, unemployment
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2014-46-11
Thursday, 11 December 2014 11:46 AM
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