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Research: Raising Kentucky's Minimum Wage Shouldn't Hurt Employment

GRAPHIC: According to the Economic Policy Institute, new research 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: According to the Economic Policy Institute, new research 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

FRANKFORT, Ky. – Kentucky lawmakers are considering raising the state's minimum wage, 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 says 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 adds that low-end wages in Kentucky – what the bottom 10 percent of workers make – are some of the lowest in the nation. According to Cooper, that's because of the low state minimum.

"Wages in Kentucky at the bottom have fallen in real terms, largely because there's been no adjustment to the minimum wage," he says.

Lawmakers have been debating raising Kentucky's minimum to $10.10 per hour.

Dan Heyman, Public News Service - KY