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New Study Damages the Case for Raising the Minimum Wage

In North Dakota’s most recent legislative session, a bill was proposed (HB 1263) to raise the minimum wage to $9.25 and mandate future increases by tying it to the rate of inflation.  Legislators were right to reject this bill.

Not long ago, Seattle was praised by progressives for implementing an aggressive minimum wage hike to $15, which was to be phased in over time.  Proponents of minimum wage increases argued it would lower poverty rates, decrease enrollment in public assistance, increase monthly pay by $480 per month before taxes, and reduce income inequality.

Researchers at the University of Washington have been studying the roll out of the hike and recently released a working paper illuminating its effects.  To be blunt, the Seattle minimum wage hikes have been disastrous.

“Our preferred estimates suggest that the Seattle Minimum Wage Ordinance caused hours worked by low-skilled workers (i.e., those earning under $19 per hour) to fall by 9.4% during the three quarters when the minimum wage was $13 per hour, resulting in a loss of 3.5 million hours worked per calendar quarter.”

They estimate that the net effect on the average low wage worker is a loss of $125 of income per month.

My own research has explored the potential effects of raising the national minimum wage from $7.25 to $9 and $10.10 as proposed by the Obama administration.  Our results show that such raises would have large negative employment effects on youth and low-skill workers.  More troubling is that the effects of youth unemployment follow young workers throughout their life cycle in the form of unemployment and persistently lower wages.  This happens because the experience gained in low wage entry-level jobs is necessary for promotion and advancement to better paying high-skill jobs.

Seattle’s minimum wage hike was meant to enhance the lives of low wage workers, but instead it is hurting the very people it claimed to help.  For those who now face reduced hours or unemployment, the prospect of poverty is an increasingly likely reality.

I firmly believe that I have a personal moral obligation to care for the poor and help my neighbors.  I am also proud to live in a community that joins me in that conviction, which is evidenced by the generosity North Dakotans display in their many acts of philanthropic giving.  Just look at what North Dakota raises on Giving Hearts Day.  However, our moral responsibility to care for the poor is not satisfied through a mandate that private business act as a charity.  To push our responsibility onto another party, as the minimum wage does, is not only morally questionable but it is also bad policy.

North Dakotans can be thankful that our legislators did not buy into the false claims that enamored Seattle. In fact, HB 1263 did not pass by an overwhelming majority (13-77). The latest research by the University of Washington demonstrates why this bill was a bad idea. 


Meet the Author

Jeremy Jackson is the director of the Center for the Study of Public Choice and Private Enterprise (PCPE) and an associate professor in the NDSU Department of Agribusiness and Applied Economics. Read his bio.

jeremy.jackson@ndsu.edu


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North Dakota State University
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