Ohio’s Proposed Wage Hike Would Result in 12,000 Lost Jobs and a $308 Million Blow to State Economy

Nearly 4,000 Lost Jobs Fall on Those Earning Under $25,000 Annually
  • Publication Date: March 2006

  • Topics: Minimum Wage

Washington, DC–The proposed legislative effort to raise Ohio’s minimum wage would lead to a catastrophic $308 million hit on the Ohio economy and the loss of 12,000 jobs, according to a study commissioned by the Washington, DC-based nonprofit Employment Policies Institute (EPI). Most of the economic cost, $202.6 million, would stem from increased labor costs to employers. But a significant portion, $105.9 million, would result from the lost income from the thousands of employees who stand to lose their jobs. Nearly one-third of the lost jobs will be from those earning less than $25,000.

The study, conducted by respected labor economist Dr. David Macpherson from Florida State University, reaffirms what many economists have found—wage increases are a blunt and ineffective means of assisting low-income employees because of the simple fact that most minimum wage earners aren’t poor. Only one-tenth of Ohio’s minimum wage earners are the sole earner in a family with kids. Over half (62.7%) are under 24 and 48.3% still live with their parents. Nearly three-quarters (73%) are part-time employees. The EPI study also found that the average family income of minimum wage employees in Ohio is $52,000 a year.

Despite the high cost of the increase, many low-income people will see no benefit because they either do not work or work too few hours to benefit from the increase. Overall, Ohio families whose incomes fall below the poverty line would experience only a $63 increase in annual income.

“By almost any measure, minimum wage increases are flawed policy,” said Mike Flynn, EPI’s director of legislative affairs. “Ohio should expand economic opportunities, not erect artificial barriers to job growth. A state Earned Income Tax Credit, based on the successful Federal program, would effectively give a raise to the low-income employees who need it most without putting their jobs in jeopardy.”