NCPA - National Center for Policy Analysis

Jeopardizes Benefits

May 8, 1996

Opponents of an increase in the national minimum wage often overlook how it would affect workers' benefits. But new research indicates that employers will try to offset the costs of any increase by cutting job benefits.

  • In addition to the hourly wage, employers offer employees a range of other benefits -- such as health insurance, on-the-job training, rest periods, flexible working hours and company discounts.
  • Since tfringe benefits have grown over the years -- from just 1.4 percent of total compensation in 1929 to nearly 30 percent today.

Because employers tend to trim or eliminate these benefits when minimum wage increases are imposed on them, those workers who do manage to retain their jobs are usually getting no more compensation than before.

But there are other reasons as well for opposing the minimum wage:

  • The typical minimum wage earner is not the head of a household supporting a family -- 37 percent are teens and 60 percent are under the age of 24.
  • According to the Bureau of Labor Statistics, another 17 percent are wives -- mostly likely earning a second household income.
  • Most minimum wage earners move up the ladder quickly -- with only 15 percent still working at the minimum three years later.

Source: Robert L. Sexton (Pepperdine University) and Dwight R. Lee (University of Georgia), "Benefits and the Minimum Wage," Investor's Business Daily, May 8, 1996.


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