Employment Policy Group Urges Wisconsin Legislators to Consider Unintended Consequences of Wage Increase and Indexing
Employment Policies Institute Says Raising and Indexing the Minimum Wage Will Hurt Wisconsinites
Publication Date: March 2010
Topics: Minimum Wage
WASHINGTON – Today, the Employment Policies Institute (EPI) urged legislators in Wisconsin to consider the negative unintended consequences of indexing the state’s minimum wage.
Legislation (SB 1), being heard today at 1:00 pm in the Assembly Committee on Labor, would raise Wisconsin’s minimum wage to $7.60 an hour and index hourly wages to cost-of-living increases. Indexed increases would be rounded to the nearest five cents ($0.05). This legislation was passed by the State Senate last year.
“At $7.60 an hour, Wisconsin’s minimum wage would be one of the highest in the nation,” said Michael Saltsman, research fellow at the Employment Policies Institute. “Legislators should remember that minimum wage increases hurt the very people they are meant to help.”
Decades of economic research show that mandated minimum wage increases spike job loss, particularly among vulnerable groups like teens, minorities, and adults without a high school diploma. In 2007, the University of New Hampshire found 73 percent of labor economists surveyed were in agreement that a mandated minimum wage hike would decrease the number of entry-level employees hired.
An automated wage hike will simply shift these negative effects from an occasional occurrence to an annual event.
Economic research out of Oregon examined the impact of minimum wage indexing in Washington and Oregon – two states that have indexed their wages the longest, and which have some of the highest teen unemployment rates in the country (30.5 percent and 31.2 percent, respectively). The study found that the unemployment rate in both states would have been over 30 percent lower if automatic indexing hadn’t created a high minimum wage environment.
“Wisconsin’s teen unemployment rate already averaged 18.7 percent in 2009,” Saltsman continued. “Unless legislators in Wisconsin want a bigger teen unemployment crisis, they should carefully consider the harmful consequences of such ill-conceived public policies.”