Minimum wage laws hurt the poor and the young (inexperienced) the most.
(The Center Square) – The Idaho state Legislature is considering a bill that would allow municipalities to raise their minimum wages above the Idaho minimum wage, which matches the federal minimum wage of $7.25 an hour. An Idaho-based think tank cautions that that could lead to some bad consequences for workers, citing Seattle as an example.
The fiscal note on Idaho House Bill 48 says there will be no cost to the change.
“There is no fiscal impact to the general fund or to any other government fund,” the explanation states. “This legislation is an authorization for local government to establish an increased minimum wage which would not increase any costs to them.”
In a report published on the Mountain State Policy Center website Wednesday, think tank President Chris Cargill said there are consequences. He calls the proposed minimum wage hikes “one of the many policy ideas peppered with tradeoffs, but one of the few that have such a direct impact on businesses and employees alike.”
Looking at the available data, Cargill admits that some workers would benefit from the law, but he points out that the hike would cut against other workers as well. Some workers would see their hours reduced. Others could wind up with fewer jobs to choose from.
He cites a report by economic researchers published in the Harvard Business Review about stores and minimum wage workers in California and Texas.
Researchers found that for every $1 hike in the minimum wage, “the total number of workers scheduled to work each week increased by 27.7%, while the average number of hours each worker worked per week decrease by 20.8%.”
In California stores, this meant “four extra workers per week and five fewer hours per worker per week — which meant that the total wage compensation of an average minimum wage worker…actually fell by 13.6%.”
Cargill also looks to Washington state, where he used to live and work for many years as Washington Policy Center’s Eastern Washington director. Washington has a state minimum wage. It also allows municipalities to set a wage above that wage, as HB 48 would make possible.
Seattle has regularly set its lowest wage higher than the state’s minimum. That sets up a contrast that economists can study, and researchers from the University of Washington took up that challenge.
What they found was consistent with what was observed of California workers: a trade-off between wages hiked and hours worked. They also found evidence that the hike to a $13 minimum wage likely cost about 5,000 jobs in the Seattle economy.
“In the end, some workers will benefit from a hike in the minimum wage, but others will see fewer hours and lower earnings,” Cargill writes. “It’s a tradeoff – not necessarily the rosy picture some activists and policymakers project.”