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Research Finds Higher Minimum Wage Not a Job Killer

GRAPHIC: According to the Economic Policy Institute, new research indicates raising the minimum wage won't affect employment numbers. Federal figures show the minimum wage has not kept up with inflation or workers' education levels. Photo credit: Finance/Morguefile.
GRAPHIC: According to the Economic Policy Institute, new research indicates raising the minimum wage won't affect employment numbers. Federal figures show the minimum wage has not kept up with inflation or workers' education levels. Photo credit: Finance/Morguefile.
June 9, 2015

INDIANAPOLIS – As debate continues over raising Indiana's minimum wage, new economic research suggests a higher wage is unlikely to hurt employment.

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. According to Cooper, economists were surprised to find 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.

Indiana's minimum wage of $7.25 is the same as the federal level, and efforts to raise it to $10.10 have already failed in the state Legislature this year. There are 29 states with minimum wages higher than the federal level.

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.

Mary Kuhlman, Public News Service - IN