Real News interviews Jeannette Wicks-Lim is an Associate Professor at the Political Economy Research Institute in Amherst, Massachusetts. Wicks-Lim specializes in labor economics with an emphasis on the low-wage labor market…
WICKS-LIM: Well, one of the things I’ve been thinking a lot about is that because of the recent proposal by President Obama to raise the federal minimum wage to $9 an hour, I’ve been thinking about the debate that always, you know, gets rehashed each time the minimum wage proposal is put on the table. And every single time the minimum wage proposal has been put on the table, there is this back-and-forth argument about whether there are negative employment effects from raising minimum wage. There’s almost verbatim this fight about, you know, whether or not raising minimum wage is going to cost jobs, and despite the fact that there’s been a large amount of research in the recent years that has pointed towards basically finding no negative employment effects from minimum wage increases, and we still have the same old debate.
And so I’ve been thinking about, you know, what is it that would really help answer this question about whether or not there are job losses from raising the minimum wage. And one of the simple facts that we’ve come up with here in PERI in our research around the minimum wage is that actually when you look at the cost that businesses face when the minimum wage goes up, the costs are actually quite modest. And that’s what explains why there isn’t some big negative, you know, job loss that you can associate with any minimum-wage hike. This is something that we try to make clear but seems to get lost in the debate.
I’ll just give you a very concrete example. One year, in 2006, we looked at Arizona state minimum wage proposal, which was a 30 percent increase in the state minimum wage. At the time, it was $5.15, and it was being proposed to be raised to $6.75. This [incompr.] typical size of minimum-wage increase.
And what we did is we went and we looked to see how much would this cost businesses. We looked at what are the wages of workers at the time, how many hours did they work. We added that all up. We looked at payroll taxes and how much that would go up for employers. We looked at the raises that would go to workers who earn more than the–that would be earning more than the minimum wage, that is, more than $6.75 [incompr.] little bit of a boost from the minimum-wage increase. We added all that up and we compared that to businesses’ sales revenues. So that’s sort of the capacity, what they had to work with to cover these costs.
What we found is, for the average business in Arizona, that the cost increase would be less than 0.1 percent. And so if you want to think about it in real concrete terms, businesses, by raising their prices by less than 0.1 percent, would be able to cover all the costs of a minimum-wage increase of a size of 30 percent.
Further reading in connection to Europe can be found here.
Elizabeth Warren can be found at Senate hearing asking food industry representatives about their claims there is a significant impact: