Study: minimum wage hike not positive for R.I.

Rhode Island’s 35-cent hike in the minimum wage to $7.75 an hour on Jan. 1 won’t necessarily put more dollars into the state’s ailing economy, based on the findings of a new study by the Washington, D.C.-based Employment Policies Institute.
“Businesses that hire minimum wage workers tend to be grocery stores and other low-margin employers,” said Michael Saltsman, research director for the institute, which he said generally focuses on policies that affect the entry-level workforce. “Often businesses can’t raise prices because sales would go down.”
The study, “Minimum Wages: Evaluating New Evidence on Employment Effects,” by economist David Neumark and doctoral candidate in economics J.M. Ian Salas, both of the University of California Irvine, was released Jan. 9.
Covering fixed expenses and maintaining customer service could result in a cutback of hours for minimum wage workers, Saltsman said.
Rhode Island was one of nine states, plus the District of Columbia, that increased the minimum wage at the start of 2013. The increase will affect an estimated 1 million workers nationwide.
For workers struggling to make ends meet, the hike in the minimum wage is a positive sign, but not enough, said Kate Brewster, executive director of the Economic Progress Institute, a Providence-based organization that works to promote economic security for low- and modest-income Rhode Islanders.
“The minimum wage is a very important floor for raises, but even with the increase, we know that a minimum wage worker still falls short by $474 every month” of meeting housing, food, transportation, medical and miscellaneous expenses, said Brewster, according to research done for the institute’s 2012 Rhode Island Standard of Need report.
But the organization that did the new study, the Employment Policies Institute, argued that the hike in the minimum wage cuts job opportunities overall as the Ocean State struggles to whittle down its 10.2 percent unemployment rate, which is even higher for teens. “Rhode Island’s unemployment rate for teenagers is closer to 27 percent,” Saltsman said, greater than the national rate of 23.5 percent, according to the U.S. Department of Labor.
Some Rhode Island industries, such as landscaping, pay more than the minimum wage in order to have a well-trained, dependable workforce.
“I’ve been here for 30 years, and in my experience, we’ve always been above the minimum wage,” said Bruce Vanicek, owner of Rhode Island Nurseries in Middletown, which has five farms in the state totaling 500 acres.
“To start, we pay about $8.25 to $8.50 an hour,” Vanicek said. “It’s not uncommon for us to have guys work for us for 20 to 25 years.
“We can be whole lot more efficient by paying people more money,” he said. “If a guy is only half as productive, what good is that?”
Rhode Island AFL-CIO President George Nee said the organization supports the increase as a matter of economic justice and disputes that a higher minimum wage has a damaging impact on the economy.
“You could take a look at Connecticut. Their minimum wage is $8.25. Massachusetts is $8 an hour,” said Nee. “They’re doing a lot better than we are.”
But just what “better” means is not a common term in this case. The study by the Employment Policies Institute that found an increase in the minimum wage can decrease employment opportunities for low-wage workers refutes the finding of past studies, Saltsman said.
“I think raising the minimum wage is a classic case of a well-intentioned action that has consequences like reducing job opportunities,” said Saltsman.
“States that have raised the minimum wage have not experienced a reduction in poverty rates,” he said.
There are better ways to boost income, Saltsman said.
“We support policies like the Earned Income Tax Credit, which doesn’t have the unintended consequences of an increase in the minimum wage,” he said. •

No posts to display