New Study Reveals Devastating Consequences of Wage Hike for Santa Fe’s Least-Educated Adults
Economist Cites Lost Jobs, Involuntary Part-Time Employment, and Worker
Publication Date: December 2005
Topics: Living Wage
Washingon, D.C.–A new study on the outcome of Santa Fe’s Living Wage Ordinance commissioned by the Employment Policies Institute (EPI) exposes the negative economic consequences resulting from June 2004’s wage hike. The city’s least-educated adults, those the increase was intended to help, bore the brunt of the wage hike’s ill-effects.
“The results here unquestionably show a decline in labor market opportunities for less-educated adults,” said University of Kentucky labor and health economist Dr. Aaron Yelowitz, who conducted the study. “This manifests itself in higher unemployment, longer unemployment spells, more involuntary part-time work, fewer full-time equivalent jobs, labor substitution toward teenagers, and perhaps most surprisingly, in no detectable wage gains.”
The study is a follow-up to Dr. Yelowitz’s previous research on Santa Fe, which revealed roughly a 16 percent increase in the unemployment rate and an alarming loss of 540 jobs as a result of the wage hike. The research also revealed that Santa Fe’s least educated residents—those with 12 or fewer years of education—suffered nearly all the job losses.
Dr. Yelowitz’s new study shows that the job loss among this vulnerable group was due in large part to displacement by high school students attracted into the labor market by the higher wage. In fact, the likelihood that a low-wage employee was an unmarried teenager enrolled full-time in high school more than doubled after the ordinance was enacted.
This research also finds that the low-skilled adults who do keep their jobs end up working fewer hours than before; those with 12 years or fewer of education saw their hours reduced by an average of 3.2 hours per week following the increase.
Dr. Yelowitz’s research on Santa Fe provides a strong case against increasing the minimum wage again this January.
“The findings in this study should provide a cautionary tale about moving from $8.50 an hour in Santa Fe to $9.50 or $10.50,” said Dr. Yelowitz. “Based on the evidence from the initial move from $5.15 to $8.50, policymakers should expect pronounced adverse effects on the labor market, especially among less-educated adults.”
To read the study, go to www.EPIonline.org/studies