Raising Maine’s Minimum Wage Will Result in Job Loss for Low-Skilled Workers
Legislation Coming to a Final Vote in Maine this Week Will Hurt Those it Intends to Help
Publication Date: April 2008
Topics: Minimum Wage
WASHINGTON DC – Today the Employment Policies Institute (EPI) criticized a bill currently before the Maine legislature which would increase the state’s minimum wage. The group stated that the legislature’s attempt to assist low-income employees through mandated wage hikes is misguided and will result in job loss for the very people it is meant to help.
Substantial economic research clearly shows that large increases in the minimum wage decreases employment, particularly for the least skilled employees in the economy.
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. Research from Duke University found that these low-skilled employees lose their jobs to more skilled applicants—often teenagers from wealthy families who wouldn’t have taken a job paying the previous minimum wage.
The job loss is a result of the burden from consistently increasing wages by law without productivity gains. If this legislation passes, businesses with 20 entry-level employees would have to absorb over $20,000 per year in new labor costs. Businesses with small profit margins would need to sell hundreds of thousands of dollars in additional goods to recoup those increased costs.
According to U.S. Census Bureau data compiled by EPI, fully 75% of employees in Maine whose wages would be increased by the proposed hike have no dependents and either live with their parents, another relative, or live alone.
“Decades of economic research clearly demonstrate that minimum wage hikes result in job loss for the most vulnerable members of the economy,” said Rick Berman, Executive Director of the Employment Policies Institute. “The unintended consequences of this legislation is pricing low-skilled working Mainers out of the job market and increasing unemployment among those groups that need help the most.”