NCPA - National Center for Policy Analysis

EPI Study: Effects Of California's Minimum Wage Hike

March 1, 1998

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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