Vanishing First Jobs The Real Story of the Minimum Wage Presentation To Council of State Governments West Regional Meeting Coeur d Alene, Idaho September 6, 2016 By Daniel Markels Western Region Public Policy Director National Federation of Independent Business
What Is The Minimum Wage? The minimum wage is the starting hourly wage an employer must pay an employee for work. Currently, the federal minimum wage is $7.25 an hour (part of the Fair Labor Standards Act). Some states and cities have raised their minimum wage higher than that. In most instances, the higher of the prevailing minimum wage requirements is binding for employers. California and Massachusetts currently have the highest state minimum wages at $10 per hour. Emeryville, CA, currently has the highest city minimum wage at $14.82 an hour. Source: Employment Policies Institute
2016 Western States Minimum Wages Alaska $9.75 Indexed to Cost of Living Increases Arizona $8.05 Indexed to Cost of Living Increases California $10.00 $15.00 effective 1/1/2022 Colorado $8.31 Indexed to Cost of Living Increases Hawaii $8.50 $9.25 effective 1/1/2017; $10.10 effective 1/1/2018 Idaho $7.25 Montana $8.05 Indexed to Cost of Living Increases Nevada $8.25 Auto-Increases based on CPI and federal increases New Mexico $7.50 Oregon $9.25 $14.75, $13.50, $12.50 effective 7/1/2022 Utah $7.25 Washington $9.47 Indexed to Cost of Living Increases Wyoming $5.15 $7.25 federal rate supersedes
Who Earns The Minimum Wage? A 2015 report from the Bureau of Labor Statistic finds that almost half (48.2 percent) of all employees earning the federal minimum wage are between the ages of 16 to 24. Percent of minimum wage workers by age 48% 16-24 22% 25-34 11% 35-44 9% 45-54 10% 55+ Proponents of a higher minimum wage often describe the age distribution of the minimum wage workforce using the proposed higher figure (e.g. $10.10, $12, or $15) instead of the current minimum wage. This has the effect of raising both the average and median age of a minimum wage worker. Source: Employment Policies Institute
Family Situation of Those Affected by a $12 Minimum Wage Even among these older groups, the typical minimum wage beneficiary doesn t fit certain popular perceptions. Using Congressional Budget Office methodology, economists at Miami and Trinity universities found that just one in 10 of those affected by a $12 minimum wage are single parents with children. A majority of those affected are either second or third-earners in households where the average family income exceeds $50,000 per year. 41% Living w/family or Relative 21% Single Adult 20% Married Dual Earner 9% Married Sole Earner 9% Single Parent Macpherson, D., Dr., & Even, W., Dr. The Effects of a $12 Federal Minimum Wage. Employment Policies Institute, March 2016.
Unintended Consequences of Minimum Wage Increases Higher prices hurt consumers especially hard for seniors on fixed incomes proposed minimum-wage increases are rising at a much faster rate than are Social Security checks Reduced hours, benefits, and layoffs Automation Many in the fast-food restaurants are already adding self-serve kiosks to replace entry-level workers Wage creep or unhappy workers who make more than minimum wage but don t see pay raises Changed business model that make for less happy employees and customers, which includes eliminating restaurant tipping and sometimes eliminating non-profitable services Sometimes, ultimately, closing a business after many years Often times, small businesses have lower profit margins and are least able to afford increases in labor costs for some raising prices is not an option when competing against larger chains
Do Higher Minimum Wages Lead To Job Loss? Proponents say that boosting the minimum wage will reduce poverty without reducing jobs. But the best and most credible academic evidence shows otherwise: According to a 2007 summary of the minimum wage research authored by economists at the Federal Reserve Board and the University of California-Irvine, roughly 85 percent of the best research from the past two decades shows that a higher minimum wage reduces employment. A December 2015 report from the Federal Reserve Bank of San Francisco incorporated the most-current research, and concluded that, [The] overall body of recent evidence suggests that the most credible conclusion is a higher minimum wage results in some job loss for the least-skilled workers... According to the non-partisan Congressional Budget Office, a $9 national minimum wage would cost 100,000 jobs; a $10.10 minimum wage would cost a half million jobs. And according to a follow-up analysis using the CBO methodology, a $12 minimum wage would destroy 770,000 jobs. Source: Employment Policies Institute
Raising the Minimum Wage has Real Consequences for Businesses and Employees When Santa Clara raised its minimum wage this year from $9 to $11, the owner of By the Bucket said he took a hit of over $75,000. Non-tipped workers already above minimum wage demanded a raise like tipped employees. 'I don t think it s fair for tipped employees to make the same amount of money as a non-tipped employee. Now you re not making $40, $45 to $50, you re in the $60 to $70 an hour when it comes to tips,' Bucket Bar & Grill owner Jim Furious said. The restaurant laid off six employees. -- ABC 7 News, April 18, 2016 "A new McDonald s on Sutter Street in San Francisco uses touch-screen kiosks rather than entry-level employees to take customer orders. San Francisco s minimum wage increased to $12.25 an hour in May, one of the highest wage floors in the nation." -- Economic Policy Journal, May 1, 2015 Café Clem on Kittredge Street, has been reeling with the pressure of the minimum wage hike, as well as the increasing price of food. The café s owner, Dorothée Mitrani-Bell, who also owns La Note restaurant, also downtown, recently shuttered the café for several weeks while she figured out how she could continue operating the business faced with the financial stresses. In September last year, Mitrani-Bell addressed the Berkeley City Council and said simply: 'I can t survive,' explaining that the café s margins were too small. -- NOSH, Dishing on the East Bay, January 28, 2016 Above information from www.facesof15.com
$15 Minimum Wage Impact On Teens And Other Younger Workers Less skilled teens are displaced from the job market. Missing out on a job isn t just hard in the short term it s detrimental to future career prospects for youth and the least skilled workers. Lost is the invisible curriculum that teens pick up from reporting to a manager, interacting with customers and showing up to work on time. These are skills that teens don t pick up in high school and often don t have role models to mimic. - Employment Policies Institute
In job markets where young or less educated workers already have difficulty finding jobs and gaining important work experience, such mandates will likely make it much harder. Economist Harry J. Holzer I may wish to have all jobs pay at least $15 an hour. But that minimum would almost certainly reduce employment in a major way, crushing many workers possessing only basic skills. Smaller increases, though obviously welcome, will still leave many hardworking Americans mired in poverty. Warren Buffett, WSJ, 5/22/2015 Compelling evidence from many countries indicates that higher minimum wage levels lead to fewer jobs. Studies that focus on the least-skilled workers find the strongest evidence that minimum wages reduce jobs. Low-paying jobs requiring low skills are the jobs most likely to decline with increased minimum wages. In the US, higher minimum wages do not help poor or low-income families. Economist David Neumark
Seattle s Minimum Wage Experiment On June 2, 2014, the City Council of Seattle, Washington passed a local ordinance to increase the minimum wage of the city to $15 an hour, giving the city the highest minimum wage in the United States, which will be phased in over seven years, to be fully implemented by 2021: Small employers (businesses with fewer than 500 employees) will reach a $15 an hour minimum wage in seven years. Also established is a temporary guaranteed minimum compensation responsibility of $15 an hour to be met within the first five years, which can be achieved by combining employer-paid health care contributions, consumer-paid tips, and employer-paid wages. Large employers (businesses with 500 or more employees, either in Seattle or nationally) will reach $15 per hour in three years. The wages of employees who receive health care benefits will reach $15 per hour in four years. Currently, large employer top rate minimum wage is $13 and is scheduled to increase to $14 on January 1, 2017. Currently, Small employers top rate minimum wage is $12 and is scheduled to increase to $13 on January 1, 2017.
Recently Published University of Washington Study Shows Mixed Findings The UW study compared nine months of 2015 in Seattle with similar areas in the state of Washington Key findings from the study as identified in recent editorial in The Wall Street Journal were: The minimum-wage hike decreased the low-wage employment rate by about 1%. Median wages went up for those who earned less than $11 an hour in 2014 to $11.14 at the end of 2015, from $9.96. Yet the study notes that only an estimated 73 cents of the increase is owed to the minimum wage much of the increase is thanks to a strong Seattle economy. The job growth rate in Seattle tripled the national average between mid-2014 and late 2015. Seattle s uptick in hourly wages is offset by a reduction in employment and hours. The ordinance modestly held back employment of low-wage earners, and hours worked lagged behind regional trends, on average four hours each quarter (or 19 minutes per week). Many such individuals moved to take jobs outside the city at an elevated rate comparable to historical patterns, says the report. Study s authors predict the long-term consequences are likely to be greater. The business investment cycle is longer than a year, and one question is whether some employers (fast food franchise for example) will leave town when his lease ends.
November 2016 Minimum Wage Western State Initiatives Arizona Initiative: The Minimum Wage and Paid Time Off Initiative may appear on the November 8, 2016, ballot in Arizona as an initiated state statute. The measure, upon voter approval, would raise the minimum wage to $10 in 2017 and then incrementally to $12 by 2020. It would also guarantee 40 hours of annual paid sick time to employees of large firms and 24 hours to those of small firms. Colorado Initiative: The $12 Minimum Wage Amendment may appear on the November 8, 2016,ballot in Colorado as an initiated constitutional amendment. The measure would raise the minimum wage to $9.30 per hour, further providing for increases of 90 each year on January 1 until the wage reaches $12 in 2020. After 2020, the measure calls for annual adjustments to account for increases in cost of living. Washington Initiative: The Minimum Wage Initiative is an initiated state statute proposed for the Washington ballot on November 8, 2016. The measure would increase the state's current minimum wage by 2020. There were numerous versions of this measure, but supporters submitted signatures only for Initiative #1433. This measure would increase the state hourly minimum wage for employees who are at least 18 to $11.00 in 2017, $11.50 in 2018, $12.00 in 2019, and $13.50 in 2020. The measure would require employers to provide paid sick leave starting in 2018 that employees could use in certain circumstances.
If The Minimum Wage Has Substantial Drawbacks, Why Are the Majority of the People For It? A recent national poll commissioned by the Employment Policies Institute and conducted by ORC International (CNN s pollster) found that nearly six in ten Americans supported a higher minimum wage. When informed of the unintended consequences that accompany that higher mandated wage, the results flipped. When respondents were informed that a $15 minimum wage would cause some less-skilled employees to lose their jobs, 52 percent opposed the policy. The opposition grew to 63 percent when respondents were informed that a $15 hourly minimum wage would cause some small businesses to close. -- Above information from the Employment Policies Institute
Possible Alternatives to Raising the Minimum Wage Expand the Earned Income Tax Credit (EITC) Encourage Better Training Programs for Minimum Wage Workers Tax Reductions for Small Businesses