NCPA - National Center for Policy Analysis

New Evidence Shows Minimum Wage Hikes Increase Unemployment

April 19, 1999

Democrats are pressing for a $1 increase in the minimum wage from $5.15 to $6.15, arguing that the last increase from $4.25 to $5.15 had a negligible impact on unemployment. However, while the national unemployment rate has indeed declined, that for black teenage males remains unacceptably high. The latest economic research continues to blame the minimum wage for much of this unemployment.

  • In 1948, before the minimum wage was widely effective, the unemployment rate for black teenage males was just 9.4 percent -- actually lower than that for white teenage males.
  • Last month, the unemployment rate for black teenage males was 32.9 percent.
  • The rate for white teenage males was about one-third that rate.

In a new study, economists Richard Burkhauser, Kenneth Couch and David Wittenburg review the evidence from the latest minimum wage increase and find that the 1996-97 minimum wage rise led to a decline in teenage employment in the range of one to three percent.

In a study published by the Federal Reserve Bank of San Francisco, Kenneth Couch translated these conclusions into raw numbers.

  • At the low end of the range, at least 90,000 teenage jobs were lost in 1996 and another 63,000 jobs lost in 1997.
  • At the higher end, job losses may have equaled 268,000 in 1996 and 189,000 in 1997.
  • He estimates that a $1 rise in the minimum wage will further reduce teenage employment by between 145,000 and 436,000 jobs.

Even in a growing economy, this is a high cost to pay.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, April 16, 1999.

 

Browse more articles on Economic Issues