States that raised their minimum wages have seen a huge loss in job growth since the beginning of the year

The thirteen states that saw minimum wage increases on January 1 have kept a combined 129,200 workers out of employment opportunities since the beginning of the year, according to data published this week by the American Action Forum.

The bulk of the minimum wage hikes were automatic inflation adjustments already mandated by state legislatures. Four state legislatures, however, took specific action to raise their minimum wages, the increases of which range from 45 cents to $1 per hour.

“While many assume that it would come out of profits of large companies, in reality it only affects restaurants and retail businesses that have narrow profit margins,” Ben Gitis, a policy analyst at the American Action Forum, explains in the study. “They have no choice but to either reduce their current employment levels or put off plans to expand and make new hires. As a result, the cost of the minimum wage comes out of the pockets of unemployed workers who are denied an opportunity to work.”

The study looks specifically the impact of these minimum wage increases in the restaurant and retail industries. States that raised their minimum wages have seen an anemic 0.6 percent net-job growth in these two industries since the beginning of the year, while states that kept their laws unchanged saw a 2 percent increase in net-job growth.

Gitis concedes that an unusually cold winter may have had an impact on overall job growth, but notes that states that raised their minimum wages “experienced relatively warm weather” than states in which wage laws remained unchanged. He also points out that other factors may have come into play.

“[A] simple differences-in-differences calculation, which helps control for outside factors that affect hiring, reveals that in May the average net job growth rate in retail and restaurant services was 1.7 percentage points lower in states that raised their minimum wages in January than in states that did not,” Gitis writes. “Applying this result to employment levels reveals that all the state minimum wage increases in January together cost 129,200 new jobs.”

Here’s the state-by-state breakdown:

Rather than lawmakers at the state and federal levels picking winners and losers in the job marketplace by artificially raising wages, Gitis says that “it is time policymakers consider policies that actually improve job creation and get people back to work.”

 


The views and opinions expressed by individual authors are not necessarily those of other authors, advertisers, developers or editors at United Liberty.