NCPA Minimum Wage Issues - EPI Study: Effects Of California's Minimum Wage Hike

Minimum Wage Issues

EPI Study: Effects Of California's Minimum Wage Hike (TEXT)

Researchers say the 1998 California state minimum wage hike from $5.15 to $5.75 per hour will cause more than 25,000 workers to lose job opportunities and approximately $230 million in annual income.

At the same time, minimum wage employers will see their labor costs rise by $790 million per year to provide minimum wage workers an increase in average family income of only 2 percent. Less than one-fifth of the workers who will be affected by the increase are the sole breadwinners in families with children.

Of affected workers, many are very young -- 20 percent age 16 to 19 and 23 percent young adults age 20 to 24; 27 percent living with a parent or parents. More than half of affected workers have never been married.

Of the 25,000 lost job opportunities from the California increase, Hispanic workers will account for more than half.
Almost half of the burden will be borne by workers with annual family incomes less than $20,000, as well as workers under age 25.
Of the total income gains generated by wage hike, only one dollar in five will go to workers living in families with incomes of less than $10,000 (see figure).

Current estimates are that the $790 million in additional labor costs associated with the California minimum wage increase will fall disproportionately on retail employers ($238 million) and service-sector employers ($225 million), and on employers in the Los Angeles area ($300 million).

Source: David A. MacPherson, "Effects of the Proposed 1998 California Minimum Wage Increase," March 1998, Employment Policies Institute, 1775 Pennsylvania Avenue, N.W., Washington, D.C. 20006, (202) 463-7650.

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