Harkin Minimum Wage Proposal Would Eliminate at least 467,000 Jobs, Not Create Them
Award Winning Research Shows Proposal Would Do Little to Help Those in Need
Publication Date: March 2012
Topics: Minimum Wage
WASHINGTON – Today, the Employment Policies Institute (EPI) responded to Senator Tom Harkin’s proposal for a 35 percent hike in the federal minimum wage as part of his Rebuild America Act. Award-winning research from economists at Cornell University and American University confirms that such a policy would destroy jobs, not create them, and do little to reduce poverty.
“Using a minimum wage increase to boost the economy is like using an oven to create ice cubes—it just doesn’t work,” said Michael Saltsman, research fellow at EPI.
Using Census Bureau data, the economists studied an earlier proposal to raise the federal minimum wage to $9.50 an hour. They concluded that the policy was unlikely to have an impact on poverty: Only 11 percent of employees who would benefit from such an increase were living in poor households, and 63 percent were living in households with an income more than twice the poverty line.
The authors conservatively estimated that 467,500 employees would be priced out of a job following an increase in the minimum wage to $9.50—in some simulations, the job loss topped 1 million. The study, which appeared in 2010 in the Southern Economic Journal and was supported by EPI, is available here.
“Advocates claim that the minimum wage would be over $10 an hour today if it had been indexed for inflation since 1968,” Saltsman continued. “This is a misleading argument, since the minimum wage would only be $3.99 today if it had been linked to inflation since it was created in 1938.”
Economic research from Florida State University and Miami University shows that two-thirds of minimum wage earners receive a raise in their first one to 12 months on the job. Raising the minimum wage makes it more difficult for these less-skilled job seekers to get the experience they need to move up.
Saltsman concluded: “If Senator Harkin wants to boost the economy and have an impact on the country’s unemployment rate—especially the nearly 24 percent unemployment rate for young adults—he needs to focus on policies that lower barriers to hiring, not raise them.”