NCPA - National Center for Policy Analysis

Let States Set Their Own Minimum Wage

October 28, 1999

It would be absurd to contend that unemployment and other economic conditions are uniform throughout all 50 states and in every city, town and village. Obviously, local economic circumstances differ widely. How is it then, experts ask, that Congress sets a uniform minimum wage for all localities and all conditions?

Wouldn't sensible public policy have states setting their own minimums compatible with regional needs? That suggestion is being advanced by certain economists.

  • No serious economist doubts that the minimum wage destroys jobs -- and some researchers state that for every 10 percent rise in the minimum, employment is reduced by 2 percent to 6 percent.
  • Peter Brandon, of the Institute for Research on Poverty, has found that minimum wage increases draw new workers -- primarily students and teens -- who displace low-skilled welfare recipients.
  • As a result, recipients in states that raised their minimum wages remained on welfare 44 percent longer than those in states that did not increase their minimums.
  • Unemployment now exceeds 9 percent in 272 communities and 30 municipalities have jobless rates of 30 percent or more.

Raising the national minimum to $6.15 an hour, as proposed, would constitute a 45 percent increase since 1996 -- compared to inflation of barely 5 percent.

If greater employment of those on welfare is truly the goal, then increasing the national minimum wage clearly works to the disadvantage of people in these cities and towns.

Advocates of a flexible minimum wage argue that it would allow officials familiar with regional labor conditions and welfare populations to develop policies which best fit states' unique circumstances.

Source: Doug Bandow (Cato Institute), "Flexible Minimum Wage Option," Washington Times, October 28, 1999.

 

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