Raising Minnesota’s Minimum Wage Will Result in Job Loss for Low-Skilled Workers

House to Vote Today on Legislation that Will Hurt Those Targeted for Help
  • Publication Date: May 2008

  • Topics: Minimum Wage

WASHINGTON, D.C. – Today the Employment Policies Institute (EPI) criticized SB 875, legislation scheduled to come to a vote today in the Minnesota House, which would increase the state’s minimum wage by nearly 30% over the next 15 months. The group stated that any attempt to assist low-income employees through mandated wage hikes is misguided and will result in job loss for the very people targeted for help.

Substantial economic research clearly shows that large increases in the minimum wage decrease employment, particularly for the least-skilled employees in the economy.

Cornell University economists found that adult high-school dropouts suffer four times more employment loss from a minimum wage hike than their more educated counterparts. Research from Duke University found that low-skilled employees lose their jobs to more skilled applicants—often teenagers from wealthier families who wouldn’t have taken a job paying the previous wage.

The job loss is a result of consistently increasing wages by law without any corresponding improvements in productivity or the economic climate. If this legislation passes, businesses with 20 entry-level employees would have to absorb more than $70,000 per year in new labor costs. Businesses with small profit margins would need to sell hundreds of thousands of dollars in additional goods to recoup those increased costs.

“Decades of economic research clearly demonstrate that minimum wage hikes result in job loss for the most vulnerable members of the economy,” said Rick Berman, Executive Director of the Employment Policies Institute. “The unintended consequences of this legislation would be pricing low-skilled working men and women in Minnesota out of the job market and increasing unemployment among those groups that need help the most.”