NCPA - National Center for Policy Analysis

A Higher Minimum Wage?

January 26, 1998

President Clinton is expected to offer an increase in the minimum wage in his State of the Union address tomorrow. Congressional Democrats want it raised by 50 cents per year, to $6.65 by the year 2000 (see figure).

Although the national unemployment rate hasn't risen due to the 1996 increase from $4.25 to its current level of $5.15, this is not true for all segments of the population.

Historically, the main impact of the minimum wage has been on black teenage males, and this continues to be the case.

  • In September 1996 the unemployment rate for this group was 36.6 percent.
  • After the minimum wage rose from $4.25 to $4.75 on October 1, 1996, their unemployment rate jumped to 38.6 percent and to 41.1 percent in November 1996.

A similar jump in unemployment occurred last year as well, when the minimum wage rose from $4.75 to $5.15 on September 1, 1997.

  • In August, the unemployment rate for black teenage males was 33.9 percent.
  • In September their unemployment rate leaped to 37.6 percent.
  • As of December, the unemployment rate for black teenage males was still above its pre-increase level at 36.2 percent.

A recent study from the union-backed Economic Policy Institute shows that 60 percent of the benefits of the 1996 minimum wage increase went to middle class and wealthy families. The reason is because many of those benefiting were teenagers and secondary workers living in well-to-do families. At a minimum, this shows that the poor benefit from the minimum wage much less than is commonly believed.

Source: Bruce Bartlett (senior fellow, National Center for Policy Analysis), January 26, 1998.

 

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