Raising Pennsylvania’s Minimum Wage Will Result in Job Loss for Low-Skilled
Earned Income Tax Credit a better way to help those in need
Publication Date: March 2006
Topics: Minimum Wage
Washington DC –While the intent of raising the minimum wage in Pennsylvania is to assist low-skilled employees, a mandated hike will result in job loss for the very people it is meant to help, according to the Employment Policies Institute.
“Wage hike proponents may be acting with the best of intentions, however, it is impossible to escape the drastic negative economic consequences of job loss for the least-educated,” said Mike Flynn, EPI’s Director of Legislative Affairs. “Such a measure would actually hurt the people it is intended to help.”
Decades of research dating back to the creation of the Federal minimum wage in 1939 clearly show that increases in the minimum wage decrease employment, particularly for the least skilled employees in the economy. Cornell University economists found that adult high school dropouts and African American young adults suffer four times more employment loss from a minimum wage hike than their more educated and non-black counterparts, respectively. Research from Duke University found that these low-skilled employees lose their jobs to more skilled applicants—often teenagers from wealthy families who did not even search for a job at the previous minimum wage.
Wage increases also fail to meet their stated goals for the simple fact that most minimum wage earners aren’t poor. Research from Florida State University found that only 10 percent of minimum wage earners in Pennsylvania are the sole earner of a family with kids. Over half (56.2 percent) are under 24, and nearly half (45.9 percent) still live with their parents. The average family income of minimum wage employees in Pennsylvania is over $49,000. Knowing this, it is little surprise that 80 percent of the benefits of a wage hike go to families that aren’t poor.
Pennsylvania lawmakers have an opportunity to effect real change for low-skilled employees during a special hearing this month by considering a state earned income tax credit [EITC]. An EITC, as a supplement the already highly successful federal program, could give the Commonwealth’s most needy full-time working families an effective wage increase to well over $7.20 an hour without jeopardizing their jobs.
“A state EITC takes into account household income and dependents, something a minimum wage hike can’t do,” said Flynn. “As a result, the benefits reach those in real need without putting them at risk of losing their job.”