Idaho Minimum Wage Increase Would Not Reduce Social Welfare Use
Author: Michael Saltsman
Publication Date: February 2016
Newspaper: Twin-Falls Times News
Topics: Minimum Wage
Should Idaho conservatives rally behind a minimum wage increase?
Idaho Democrats seem to think so, arguing recently that an increase in the state minimum wage from $7.25 to $9.25 by 2018 will save taxpayers money by reducing spending on social welfare programs. Assistant Minority Leader Mat Erpelding boasted that, by raising the minimum wage in Idaho, the state could “get people to a place where they no longer need food stamps, they no longer need Medicaid.”
It’s a pleasant fiction, but the data suggests otherwise. A recent study conducted by Joseph Sabia and Thanh Tam Nguyen of San Diego State University found that past minimum wage increases at both the federal and state level have had no net effect on participation in, or spending on, social welfare programs such as Medicaid and food stamps.
To reach this conclusion, empirical evidence was gathered from 35 years of data across multiple data sets. The economists focused on six major social programs, including Supplemental Nutritional Assistance Program, Medicaid, Temporary Assistance for Needy Families, and the Program for Women, Infants, and Children.
The research suggests that one reason why minimum wage increases don’t reduce social welfare use is because most recipient of the wage increase aren’t recipients of public benefits. For instance, just 16 percent of the employees who would be affected by a $10.10 federal minimum wage are SNAP (food stamp) recipients, and just 13 percent are Medicaid recipients.
More important, the study concludes that rather than increasing the incomes of all entry-level employees, raising the minimum wage redistributes income among them. Some employees gain, but it’s at others’ expense.
For instance, the authors note a decrease in SNAP participation in several isolated cases after a minimum wage increase. But at other times, they witnessed an increase in the number of cases of lunch and housing assistance—suggesting that a reduction in opportunities following a minimum wage increase had made the recipients worse off.
This study’s findings are consistent with an earlier conclusion from the Congressional Budget Office’s 2014 report on minimum wage increases. In December 2015, the Federal Reserve Bank of San Francisco released a report concluding that recent minimum wage increases have caused a reduction in 100,000 to 200,000 jobs nationally, relative to before the Great Recession.
We are witnessing these detrimental consequences in cities like San Francisco, Oakland, and Seattle, where small restaurants, retailers, and child care providers have either shut down or cut back on staffing in order to adapt to dramatic minimum wage increases. (These stories and others are available online at FacesOf15.com.)
Erpelding’s goal of less reliance on government programs resonates in the red state of Idaho. However, economic research shows that a higher minimum wage does not save taxpayers money; instead, it forces some employees to be entirely dependent on government when they lose their jobs. The Republican majority in the Idaho Statehouse rejected a similar proposal last year and will face the issue again in the 2016 legislative session. They shouldn’t be swayed by the siren song of less welfare participation.