New Nevada Minimum Wage Rate Will Cost Jobs

Today’s Announced Hike Will Put Additional Pressures On Small Businesses during Weak Economy
  • Publication Date: April 2009

  • Topics: Minimum Wage

WASHINGTON DC – Today, the Employment Policies Institute criticized the new wage hike to go into effect in Nevada. Governor Jim Gibbons announced that on July 1st, the Nevada minimum wage will be increased to $6.55 per hour for those businesses that offer health and $7.55 per hour for those that do not. This automatic wage increase is the result of legislation in 2006 which indexed Nevada’s wage to inflation beginning in 2008.

Substantial economic research clearly shows that large increases in the minimum wage decreases employment, particularly for the least skilled employees in the economy. The data reflects this in Nevada. Preliminary data from the Bureau of Labor Statistics shows that Nevada has an unemployment rate of 10.1 percent, 7th highest in the nation and nearly double what it was in February 2008 after indexing was first implemented (5.5 percent).

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. A study from the University of California at Irvine demonstrated that for every 10 percent increase in the minimum wage, employment falls 4.5 percent for high school dropouts and 8.5 percent for minority teens.

The job loss is a result of the burden from consistently increasing wages by law without any regard for what is happening in the economy. As a result of Nevada’s increase, businesses with 20 entry-level employees would have to absorb over $25,000 in new labor costs over the next year. That doesn’t include the ripple effect on employees making higher than the minimum wage or the increase in taxes the employer has to pay. 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 society,” said Kristen Lopez Eastlick, Senior Economic Analyst for the Employment Policies Institute. “When the government is forcing a substantial cost increase on small businesses, while demand for their products and services is dropping, the result is going to be increased job loss and cut hours for vulnerable members of the workforce. Nevada’s law which automatically increases the minimum wage, without any mechanism for stopping it during an economic downturn, is a failed policy that is costing thousands of hard-working Nevadans their jobs.”