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Minimum Wage Myths – Who in Arkansas Needs a Raise?

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Tuesday, September 3, 2013   

LITTLE ROCK, Ark. - Fast-food workers have been agitating for a raise and some in Congress are pressing to increase the minimum wage. But what would the actual economic impact be of a boost for the lowest-paid workers?

Critics have charged that raising the minimum wage would mostly help teenagers, but economists say that's largely a myth. David Cooper, an analyst at the Economic Policy Institute, looked at who would get a bump in pay if the hourly minimum went up to just over $10, as one bill in Congress proposes. He found it would be mostly the working poor, including a large portion of single mothers.

"The reality is that the average age of these workers is 35 years old," he said. "The majority of them are women, a little over a quarter have children, and 55 percent work full-time; this is their full-time job."

Another common concern is that raising the minimum wage would increase unemployment. Cooper said that was the conventional wisdom, until a series of studies in the 1990s compared states that raised their minimum wages with others that had not. Cooper says the first looked at border counties between New Jersey and Pennsylvania.

"What they found was that in New Jersey, where the minimum wage was raised, employment actually went up relative to Pennsylvania, the direct opposite of what the textbook model would suggest."

He said other studies have also confirmed that raising low-end wages doesn't increase unemployment.

Cooper said the economists found that a higher minimum wage improved productivity, reduced turnover and absenteeism, and boosted morale among low-wage employees. In addition, he said, the new wages have a ripple effect on local economies, because most minimum-wage workers have to spend every dime they make.

"Maybe they needed to buy a new car. Now that they're making a little more money, they can afford to make a payment plan, so they go and they buy that new car," Cooper cited as an example. "That not only benefits the car manufacturer, but it also benefits the local dealership."

About 350,000 Arkansans would see their pay increase if the federal minimum wage went up to $10.10 an hour. Arkansas has a lower state minimum wage, which means a few workers would not receive an increase.

More information is at goo.gl/avW0Fu.




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