NCPA - National Center for Policy Analysis

$15-hour Minimum Wage Could Harm America's Poorest Workers

August 7, 2015

When labor unions and activists began calling for an increase in America's minimum wage to $15 an hour, many thought they would be pleased to receive much more modest increases. Lately, however, minimum wages have risen to $15 an hour in some cities, such as Seattle, San Francisco and Los Angeles, according to Harry Holzer of the Brookings Institution.

Many economists worry minimum wage increases tend to reduce employment, hurting young and less-educated workers the most. In a Congressional Budget Office report last year, policy analysts predicted the federal minimum wage to $10 an hour would raise wages for 16 to 24 million people while eliminating about half a million jobs -- a reasonable tradeoff worth embracing, in my view.

A $15 an hour minimum wage constitutes a wage increase of 50 percent to 100 percent in most places. In cities like Seattle, with a relatively more educated workforce and dynamic labor market, it might be a gamble worth taking. But in other cities, such as L.A. and Washington, D.C. -- with their large populations of less-educated workers, including unskilled immigrants -- such increases are extremely risky. In a city like Washington D.C. where unemployment among those with a high school education or less is at a worrisome 15 percent, jobless rates will almost certainly rise. Many employers will be very reluctant to pay high wages to workers whose skills are so modest.

The increases up to $15 are much greater in magnitude than anything we have studied in the past; because of this, it's hard to say if the previous research that found modest negative effects on employment would hold true, and a reasonable guess is that the effects now will be much more negative. State and especially local increases of this magnitude will generate big incentives for employers to move across local borders, especially from central cities to suburbs.

Source: Harry Holzer, "A $15-hour minimum wage could harm America's poorest workers," Brookings Institution, July 30, 2015.

 

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