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Research: Raising Minimum Wage Doesn't Hurt Employment

GRAPHIC: New research from the Economic Policy Institute indicates raising the minimum wage will not slow employment. Federal figures show the minimum wage has not kept up with workers' education levels or with inflation. Graphic courtesy of the Economic Policy Institute.
GRAPHIC: New research from the Economic Policy Institute indicates raising the minimum wage will not slow employment. Federal figures show the minimum wage has not kept up with workers' education levels or with inflation. Graphic courtesy of the Economic Policy Institute.
June 8, 2015

CHARLESTON, W.Va. – West Virginia's minimum wage is rising, and new economic research suggests that shouldn't hurt employment levels.

Critics of increasing low-end pay say it prices some workers out of the job market. David Cooper, senior economic analyst with the Economic Policy Institute, says that used to be the standard thinking among economists.

A recent study compared employment in one location that raises the minimum with a neighboring location that doesn't, while another study looked at 600 pairs of counties along state borders. Cooper says, to their surprise, economists found very little difference in job numbers.

"Given the research, any effect on employment that would happen from the increases we're seeing right now is going to be very small, whether it's positive or negative," he says.

Cooper says research has determined that with higher wages, employers are getting lower turnover and higher productivity – more than enough to make up for the cost of the higher pay. He notes that a sizable number of minimum wage employers are in businesses that see higher consumer demand when low-income families have more money.

"That means there's more customers coming through the door, in the retail sector in particular and in fast food," he says. "Presumably, a lot of those workers go out and shop in retail and buy fast food."

Cooper notes the minimum wage has fallen far behind inflation, and in purchasing power, the current federal minimum would have to rise about $10 to get back to where it was 50 years ago. He says that until the recent increases, low-end wages in West Virginia – what the bottom 10 percent of workers make – were last in the nation.

"The lowest in the country," he says. "That is to say that the increase in West Virginia's minimum wage is probably long overdue."

Lawmakers voted to increase West Virginia's minimum by $1.50 over two years. The first 75 cents of the raise went into effect in January, but Cooper says it's too soon to know what it may be doing to employment.

Dan Heyman, Public News Service - WV