Minimum Wage Indexing Legislation Would Further Harm Rhode Island’s Job Market

A Bill Being Debated Today in the State Senate Would Cause Job Loss For Teens and Less Educated Rhode Islanders
  • Publication Date: May 2009

  • Topics: Minimum Wage

WASHINGTON, D.C. – The Employment Policies Institute (EPI) criticized legislation being considered today by the Rhode Island Senate (SB 659) that would put increases in the state minimum wage on auto pilot beginning in 2011.

Current Bureau of Labor Statistics data shows that Rhode Island has the 4th highest unemployment rate in the country as of April 2009 at 11.1%.And, according to research commissioned by EPI, the state also has the 5th highest teen unemployment rate in the nation. Between April 2008 and March 2009, the state’s teen unemployment rate was 29.0 percent, significantly higher than the US average of 19.9 during the same 12 months. Economic research demonstrates that increases in the minimum wage hurt vulnerable members of the workforce, like adults without a high school diploma and teenagers.

The overwhelming amount of economic research confirms that putting the minimum wage on autopilot destroys jobs for low skilled workers while doing little to address poverty. A study from the University of California at Irvine demonstrated that for every 10 percent increase in the minimum wage, estimates are that employment falls 4.5 percent for high school dropouts and 8.5 percent for minority teens. Research from the University of Georgia found that every 10 percent increase in the minimum wage was associated with a 4.6 to 9.0 percent decline in teenage employment in small businesses. In 2008, research from American University and Cornell University showed that the many state minimum wage hikes that took place during 2003 through 2007 did nothing to reduce poverty rates.

“Decades of economic research by leading economists at major universities demonstrates that increased job loss follows mandated wage hikes, particularly among the least skilled and least educated workers,” said Kristen Lopez Eastlick, senior economic analyst for the Employment Policies Institute. “It doesn’t take an economic expert to see the pitfalls with automatic wage hikes. If government is mandating businesses increase their labor costs regardless of skill levels or productivity, the result is going to be lost jobs – especially at a time when small businesses are struggling in a weak economy.”

“Rhode Islanders should be particularly reticent to pass legislation that would do any more damage to the job market,” Eastlick concluded.