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Minimum wage, maximum harm

By Aaron Morris

Supporters of raising Kentucky’s minimum wage are at it again. Get ready for a bombardment of sad tales about single parents striving to make ends meet by working two jobs at the current hourly minimum wage of $5.15.

While depressing personal accounts and anecdotal narratives make great headlines, solid research indicates that the consequences of raising the minimum wage far outweigh the few and temporary benefits of such a decision – especially for Kentucky’s youngest workers.

A recent study by the Employment Policies Institute indicates that 9.7 percent of workers under 20 years old work at minimum wage. This falls to 2.6 percent of workers between 20 and 25 years old. Less than 1 percent of employees older than 25 years old earn only the minimum wage.

The institute studied employment patterns between 1998 and 2002 and found that young workers who start out at minimum wage don’t remain on the bottom of the pay scale for long. Overall, minimum-wage workers experienced median wage growth of 10.4 percent compared to only 1.7 percent for the rest of the workforce.

In fact, two-thirds of minimum-wage workers receive raises during the first year.

Most supporters of raising the minimum wage sincerely want to help younger, low-skilled workers. However, their proposed solution will not attain the result they desire.

Forcing employers to pay entry-level workers a substantially higher wage will cut the first rung off Kentucky’s employment ladder. This would severely limit the opportunities available to the state’s youngest employees.

An analysis cited by the Southern Economic Journal concluded that for every 10 percent increase in the minimum wage, employment for teenagers decreased by 5.7 percent.

The national minimum-wage increases in 1990 and 1991 hurt female teenage workers the most. According to the American Economic Review, employment declined by 7.7 percent for female teenagers as a result of increasing the minimum wage from $3.35 in 1990 to $4.25 in 1991.

Raising Kentucky’s minimum wage would harm young, less-experienced workers who provide entry-level services in many small businesses across Kentucky.

Instead lawmakers should preserve these early opportunities to begin working for Kentucky’s young people by allowing them continued access to the federal minimum wage standard of $5.15 per hour.

-– Aaron Morris is a fiscal policy analyst for the Bluegrass Institute, Kentucky’s free-market think tank.

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