Study: Employment Falls When Minimum Wage Goes Up
he National Bureau of Economic Research (NBER) released a study Monday showing employment for low-skilled workers falls as the minimum wage goes up.
The study, titled “The Minimum Wage and The Great Recession,” looked at the impact of three federal minimum wages increases that occurred between 2007 and 2009. It found that during that time, employment and income for low-skilled and younger workers fell. The study found that the employment and wage impact was less in states where the minimum wage was already higher than the federal minimum.
“Between July 23, 2007, and July 24, 2009, the federal minimum wage rose from $5.15 to $7.25 per hour. Over a similar time period, the employment-to-population ratio declined by 4 percentage points among adults aged 25 to 54 and by 8 percentage points among those aged 15 to 24,” the study said.
“Over three subsequent years, we find that binding minimum wage increases had significant, negative effects on the employment and income growth of targeted workers,” the study concluded. “Lost income reflects contributions from employment declines, increased probabilities of working without pay.”
“The people we were supposed to be helping saw their wages fall,” Michael Saltsman, research director at the Employment Policies Institute, told The Daily Caller News Foundation.
“In general, economists have found that each 10 percent increase in the minimum wage sees a decreased employment in certain groups,” Saltsman explained. “About a 1 to 3 percent decrease.”
The study also looked at Earned Income Tax Credit (EITC) as a possible alternative to minimum wage increases, increasing take-home pay for workers without hurting employment prospects. EITC is a refundable tax credit for low- to moderate-income workers.
“Analyses of the EITC have found it to increase both the employment of low-skilled adults and the incomes available to their families,” the study explained. “The EITC has also been found to significantly reduce both inequality…and tax-inclusive poverty metrics, in particular for children.”
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