High Minimum Wage States Home To Most ‘Black Spots’
Author: Craig Garthwaite
Publication Date: July 2003
Newspaper: Investor's Business Daily
Topics: Minimum Wage
America’s unemployment rate is now 6.4%, a nine-year high.
For many Americans, rising unemployment is an unwelcome change from the long economic boom of the 1990s.
But for some, the average rate hides a bigger story.
A new study by the Employment Policies Institute (EPI) identifies 397 counties and cities — each with a population of over 10,000 — that had unemployment rates of 9% or above in 2002.
Predictably, the number of these unemployment black spots has increased as the economy has deteriorated.
In 2001, there were 277 such black spots. In 2000, there were 191.
More troubling is the fact that the total number of people living in these depressed conditions has risen even more dramatically.
While the total number of localities affected has approximately doubled, the number of affected Americans has nearly tripled and now stands at over 26 million.
This suggests that bigger and more populous cities and counties are falling victim to these exceptionally high unemployment rates.
These areas failed to create jobs during the ’90s boom, and now during the downturn they are falling even further behind.
What makes matters worse is the fact that while people languish in these localized depressions, state legislators enact policies that destroy their job prospects.
The number of states with minimum wages that are higher than the federal level has increased from six to 14, despite state unemployment rates rising to levels not seen since the recession of the early 1990s.
While state legislators may believe that they are helping the poorest residents in their states by passing these laws, in reality they are locking the least skilled workers out of the labor force.
A 1995 Michigan State University study found that increases in the minimum wage increase labor costs, heating up the competition for jobs.
Ultimately, employers seek out more highly skilled employees, and workers with the fewest skills are left out in the cold.
Clearly, prolonged entry-level unemployment is the inevitable consequence of these minimum wage hikes.
In areas that are already suffering from crippling unemployment rates, these policies are ruinous.
EPI’s research shows that states with the strongest anti-job policies have, unsurprisingly, the worst local unemployment problems in the nation.
Highest Jobless Rates
Alaska, Oregon, Washington, Illinois, California, Massachusetts and Connecticut — the seven states where the minimum wage is the highest — account for 20% of America’s unemployment black spots.
The states with the three highest minimum wages — Alaska, Oregon and Washington — have the highest unemployment rates in the nation.
These states recently received an extension of federal “emergency” unemployment benefits that was twice as long as nearly every other state in the country.
Recently, leaders from these states were forced to come to Congress, hat in hand, asking for a doubling of federal job-training dollars in an attempt to let their less-skilled workers enter the labor force.
These job-training dollars would not be necessary if high wage mandates had not destroyed the entry-level job market.
Entry-level workers would have been able to take advantage of effective on-the-job training in jobs that would boost their skill level and corresponding wage.
They would also have been able to claim the earned income tax credit, an anti-poverty program for those in work.
Despite the negative consequences these high minimum wage states are suffering, this unfortunate policy trend has momentum.
Alaska, which has 22 high unemployment black spots, is poised to increase its minimum wage to $7.15 an hour.
Oregon and Washington State, with 24 black spots, recently raised their minimum wages.
High unemployment states like New York and Michigan also plan minimum wage hikes despite having more than their fair share of high job loss pockets.
Americans stuck in these pockets of economic despair need assistance.
But the depth of the “localized depression” in these 399 areas tells us that current policies are failing these communities.
In these depressed areas, state minimum wage increases have particularly harsh consequences for those who were left behind when business and industry left the area.
If the road to hell is paved with good intentions, these state minimum wage hikes have qualified for the latest economic paving project.