Majority of Labor Economists Believe Minimum Wage Hikes Cause Unemployment

Negative Effects Of Minimum Wage Hikes Fall Disproportionately On The Low-Skilled
  • Publication Date: July 2007

  • Topics: Minimum Wage

WASHINGTON — An overwhelming majority of American labor economists agree that minimum wage hikes are an inefficient way to address the needs of poor families, according to a new national survey of the American Economic Association (AEA). The survey was conducted by the University of New Hampshire Survey Center and sponsored by the Employment Policies Institute.

Over 73 percent of AEA labor economists believe that a significant increase will lead to employment losses and 68 percent think these employment losses fall disproportionately on the least-skilled. Only 6 percent feel that minimum wage hikes are an efficient way to alleviate poverty. The survey also found:

  • Employers would turn to better skilled employees: More than two-thirds of labor economists (68 percent) believe a mandated wage increase will cause employers to hire applicants with greater skills.
  • The minimum wage is not an effective anti-poverty measure: 70 percent say that an expanded Earned Income Tax Credit (EITC) would best assist those in poverty. Nearly two-thirds (64 percent) believe that an expanded EITC would lead to employment gains. Meanwhile, just 9 percent say a higher minimum wage is the best anti-poverty measure and only 6 percent believe that a minimum wage increase would lead to employment gains.

Recent studies on the effects of the minimum wage support the majority’s opinion. Research from David Neumark at the University of California at Irvine shows that for every 10 percent increase in the minimum wage, low-skilled unemployment increases by 8 percent. His results also indicate that states fully affected by a $7.25 federal minimum wage will see young minority unemployment rates increase by as much as 15.6 percent. Based on these results, today’s wage hike is bad news for African American teens who already suffer unemployment seven times higher than the rest of the nation.

“Today’s federal minimum wage hike may sound like a good idea, but the experts disagree,” said Jill Jenkins, Chief Economist at the Employment Policies Institute. “Low-skilled workers are getting much less than has been promised. Over time, many may even find themselves worse off.”