$10.10 minimum wage a scary idea
Author: Michael Saltsman
Publication Date: March 2015
Newspaper: Lima News
Topics: Minimum Wage
Spring is here, which means cold winds and icy sidewalks are replaced by budding flowers and warmer breezes. Unfortunately, it also means the Ohio legislature will again consider the perennial bad idea of raising the minimum wage.
State Senator Kenny Yuko has introduced this year’s effort, which would raise the state’s minimum wage by 24 percent to $10.10 an hour. Proponents argue, as they usually do, that the bill is necessary to reduce hardship for the lowest-paid employees. But a hard look at the evidence, as well as a new analysis specific to Ohio, shows that a wage increase delivers results that are far different than the rhetoric.
It’s been a difficult winter for supporters of the minimum wage, with a series of high-profile stories providing tangible evidence of the policy’s consequences. In Michigan an increase in the state’s minimum wage to $8.15 forced a nonprofit restaurant focused on training hard-to-employ jobseekers to close its doors. And in San Francisco, a local bookstore was nearly forced to close up shop as a consequence of that city’s $15 minimum—until customers swooped in with a last-second lifeline to keep it going another year.
The consequences of a minimum wage increase aren’t just anecdotal: Economists at the University of California-Irvine and the Federal Reserve Board reviewed two decades of research on the subject, and found that 85 percent of the most credible studies on the minimum wage point to job losses for less-skilled employees. More recently, the non-partisan Congressional Budget Office (CBO) estimated that a $10.10 minimum wage implemented nationwide could cause 500,000 Americans to lose their jobs.
Now a new analysis of Census Bureau data by economists at Trinity and Miami Universities finds that $10.10 legislation, if implemented in Ohio, would lead to over 21,800 lost jobs. Women would account for more than 12,700 – or 58 percent – of the lost jobs in Ohio.
Ohio’s businesses aren’t cutting jobs because they’re hard-hearted—they’re doing it because basic economics requires it. When labor costs increase for low-margin businesses like restaurants and grocery stores, these employers are left with one of two options: raise prices or cut costs. Because customers are cost-conscious, that often means employers are forced to trim staffing levels in favor of self-service customer alternatives.
Perhaps most concerning is that the data for Ohio suggests there’s little greater good to be achieved from a minimum wage increase. Just 8.5 percent of affected employees in Ohio are single parents; by contrast, over 61 percent are second- or third-earners that are living with family or relatives. Their average family income is $55,935—meaning the new wage isn’t well-targeted to families in poverty.
This isn’t a new problem. There were 28 states—including Ohio—that raised their minimum wages between 2003 and 2007, with grand designs on reducing poverty rates. But economists at Cornell University and American University, who studied that time period, found no such reduction. That’s because, then as now, the minimum wage is poorly-targeted to low-income families, and it unintentionally harms those it’s intended to help.
With one in five 16 to 19-year olds in Ohio still unable to find a job, this is the worst time for legislators to consider a policy change that raises barriers to getting a job. “Raise the wage” might make for a good sound bite, but it’s cold comfort for those left without any wage at all.