public policy

Report: Minimum wage hike would cost R.I. jobs

THE ACTUAL DEMOGRAPHICS for workers in Rhode Island earning minimum wage are different than the ones usually presented, according to a new report from the R.I. Center for Freedom and Prosperity.
Posted 4/4/13

PROVIDENCE – If a federal minimum wage-hike goes into effect, Rhode Islanders could see a loss of up to 3,466 jobs, according to a report issued by the R.I. Center for Freedom and Prosperity.

The proposed hike, which is supported by Rhode Island’s congressional delegation, seeks to make the federal minimum wage $10.10 versus the current $7.75.

According to the report, a similar bill proposed by the General Assembly, which would hike the state’s minimum wage to $8.25, would put roughly 432 jobs at risk.

“Equally as important, the data in the report invalidates the traditional minimum-wage worker profile, often painted by advocates who seek to increase this rate,” said the center release announcing the report.

The report found that, among the state’s minimum wage workers, 28 percent work close to a full-time, 40-hour work week. Furthermore, roughly 55 percent live with another family member or friend and are not fully responsible for all living expenses.

“The perception that minimum wage workers largely represent poor or low-income individuals, attempting to fully support their families, is not supported by the data”, Mike Stenhouse, CEO for the think tank, said in prepared remarks. “In evaluating this policy, we must take into consideration the negative effect of no job and fewer early employment opportunities for many Rhode Islanders versus the minimal take-home pay increase for a relatively small number of family breadwinners.”

The Center’s report found that, for those who currently earn $8.25 or less, the average family income is more than $61,000. Also, according to the report, roughly 60 percent of minimum wage workers are below the age of 25.

“The focus of advocates for higher minimum wages is very often on the plight of people striving to live on such low salaries, but most workers at that pay rate do not fit the profile,” said the report. “Most of them are bringing in relatively small amounts of supplemental income — many as discretionary spending cash for teens and young adults who are still largely supported by their parents.”

Calling the proposed minimum wage increase a “continuing assault on the state’s economy,” the center said it expected a minimum wage hike to $8.25 would eliminate 432 jobs, 204 of them among teenagers.

The center analyzed data from $7.40 to $8.25, because data from the state’s current rate ($7.75) to $8.25 produced “insufficient sample sizes,” according to the report.

The report was based on the work of economists David Macpherson of Trinity University and William Even of Miami University, who wrote a similar report for the center in July, analyzing the results of the state’s minimum wage increase from $6.75 to $7.40.

“In the view of the R.I. Center for Freedom & Prosperity, the loss of employment opportunities for Rhode Islanders in this group outweighs the relatively small increases in take-home pay,” said the report. “At young adults’ formative age, the connections, habits and general experience that come from working at any pay scale are vastly more valuable than the small increases that legislators are able to mandate through minimum wage laws.”

To view the full report, click HERE.

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