Studies find no job losses from higher minimum wages

Recent increases in the federal minimum wage have raised earnings for low-wage workers in Wisconsin without causing job loss, according to a new report from the Center on Wisconsin Strategy.

The COWS report, Making Work Pay: The Benefits of the 1996-97 Minimum Wage Increase for Low-Wage Workers in the U.S. and Wisconsin, was an extension of a study conducted by the Economic Policy Institute in Washington D.C.

The EPI study examined the gains reaped from the two-step increase in the minimum wage by low-wage workers and their households nationally. The federal minimum wage increased from $4.25 to $4.75 in October 1996 and rose to $5.15 in September 1997.

The COWS report shows that:

• 6.6 percent of Wisconsin workers, or slightly more than 163,000, benefited from the minimum wage increases in 1996 and 1997. This compared to 8.9 percent of all workers nationally and 7.7 percent of workers in the seven Midwestern states that, along with Wisconsin, comprise the core of the nation’s industrial heartland (Illinois, Indiana, Iowa, Michigan, Minnesota and Ohio).
• Between 1995 and 1997, the minimum wage increases likely contributed to an average pay hike of 10.7 percent (from $6.62 to $7.33 an hour) for some of Wisconsin’s lowest-paid workers. Prior to 1995, wages for many of these workers had fallen for three straight years.
• There has been no appreciable slowdown in the performance of Wisconsin’s now widely envied “jobs machine” between 1995 and 1998, the years when the negative employment effects of a minimum wage hike would most likely have been seen at the state level. In fact, at the aggregate level (total non-farm employment), and in the two most wage-sensitive industry divisions (trade and services), Wisconsin’s statewide employment growth rate from March 1997 to March 1998 was higher than in the year preceding the first of the two minimum wage increases (1995).

Based upon its analysis of the Wisconsin case, COWS concurs with EPI’s conclusion that at the national and state level, the 1996-97 increases in the minimum wage have proven to be an effective tool for raising the earnings of low-wage workers without lowering their employment opportunities.

The Center on Wisconsin Strategy is a research and policy institute based at UW–Madison dedicated to improving economic performance and living standards in the state. Copies of the COWS report can be obtained from Bill Luker Jr. at (608) 263-7563 or Robyn Richards at (608) 262-5387.

Copies of the EPI report (Making Work Pay: The Impact of the 1996-97 Minimum Wage Increase) may be obtained from COWS or from EPI Communications Director Nan Gibson at (202) 331-5546.