NCPA - National Center for Policy Analysis


September 30, 2005

The Massachusetts legislature is considering a bill, introduced by Rep. J. James Marzilli, which would raise the minimum wage in the state from its current $6.75 per hour to $8.25 per hour. Despite the fact that some of the state's leading economists support the bill, it would destroy jobs, say David Tuerck and Paul Bachman of the Beacon Hill Institute.

According to Beacon Hill estimates:

  • The increase would cost the state 26,970 jobs, mostly among low wage workers, women and those 20 years old and older.
  • The majority of workers who keep their jobs would gain $405 million in aggregate wages, but the gain would be offset by $371 million in lost wages from workers who end up unemployed.
  • A minimum wage increase would put Massachusetts at a further competitive disadvantage to neighboring New Hampshire, whose minimum wage is only $5.15 an hour.

In fact, in recent years, employment in the leisure and hospitality sector has grown 2.6 percent annually in New Hampshire, compared to only 1.9 percent in Massachusetts. Additionally, the retail sector has grown 1.2 percent annually in New Hampshire, while shrinking .03 percent in Massachusetts. Both sectors are sensitive to labor costs.

The minimum wage would also disadvantage small businesses, which compete more on service than on price, say Tuerck and Bachman.

Source: David Tuerck and Paul Bachman, "The Economics of a Higher Minimum Wage in Massachusetts," Beacon Hill Institute, June 2005.

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