The Negative Effect of Minimum Wage Hike

Posted on January 15, 2011

Christine Owens of the National Employment Law Project suggests that Montana’s Jan. 1 minimum wage increase will “directly benefit workers and state economies” (Jan. 5 Beacon: “Seven States Raise Minimum Wage”). Ms. Owens may wish that were the case, but the evidence shows otherwise.

New research from the United States Military Academy at West Point demonstrates that past increases in the minimum wage have had no positive effect on economic growth – and can even have a negative effect on the output of industries that employ less-experienced employees.

That’s not the only unintended consequence of a wage hike. The research also finds that each 10 percent increase in the minimum wage decreases teen employment by 3.6 percent.

Less business output, and lost jobs – hardly the way to help workers and stabilize an economy.

Michael Saltsman
Research Fellow
Employment Policies Institute
Washington, DC