NCPA - National Center for Policy Analysis

High Minimum Wage Linked to High Unemployment

August 20, 2003

The number of states with minimum wages higher than the federal level has increased from six to 14, despite rising unemployment rates. Higher minimum wage laws keep the least skilled workers out of the labor force, say experts.

According to a study by the Employment Policies Institute (EPI), states with high minimum wage rates also have high unemployment rates:

  • Alaska, Oregon, Washington, Illinois, California, Massachusetts and Connecticut have the highest minimum wages in the country and account for 20 percent of America's unemployment "black spots."
  • The three states with the highest minimum wages -- Alaska, Oregon and Washington -- have the highest unemployment rates in the United States.
  • High wage mandates tend to hurt the entry-level job market, because it increases labor costs and makes competition for jobs fiercer.
  • Less skilled workers aren't able to take advantage of on-the-job training that can boost their skill level and wage, says EPI.

Thus, as a 1995 Michigan State University study found, far from helping the poorest residents of a state, minimum wage laws may actually keep the least skilled workers out of the job market.

Source: Craig Garthwaite, "High Minimum Wage States Home to Most 'Black Spots,'" Investor's Business Daily, July 30, 2003; "Indexing the Minimum Wage: A Vise on Entry-Level Wages," March 2003, Employment Policies Institute.

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