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Get your money’s worth

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As activists across the Commonwealth are sorting through petitions in order to ensure the $15 minimum wage is on the ballot next November, some might be wondering, “will we get our money’s worth?” So, let’s reflect on how minimum wage policies have played out in the past. As is always true in the literature, here are two prominent studies with opposing views:

1. The Economic Effects of a Citywide Minimum Wage by Arindrajit Dube, Suresh Naidu, & Michael Reich

San Francisco is in the spotlight here. The study examines the relationship between the San Francisco citywide minimum wage policy after taking effect in 2004 on four key variables: average hourly pay, distribution of pay, total employment, and part-time and full-time employment. The minimum wage was increased immediately by 26 percent from $6.75 to $8.50 and was indexed to reach $9.14 by 2007 to account for cost-of-living adjustments. The authors looked at 254 restaurants in San Francisco and 100 restaurants in the East Bay, both fast-food as well as table-service restaurants. This choice was made since the restaurant industry has the greatest proportion and absolute number of minimum wage workers.

And all signs point to yes. Here are some of their findings on why raising the minimum wage is a valuable policy choice:

 

2. Minimum Wages and the Economic Well-being of Single Mothers by Joseph J. Sabia

But … maybe not so much. This second study finds adverse effects of minimum wage increases. The author examines the effects of increasing the minimum wage on the economic well-being of single mothers, which include poverty effects as measured by wages, employment, hours of work, weeks of work, and wage income. The author suggests that although the intention of minimum wage policies is to lift single mothers out of poverty, this policy choice may not actually be suitable since many working single mothers are already making above the state or federal minimum wage.

The main findings of the study show that minimum wage increases were ineffective at reducing poverty among this population, because of three main reasons:

  1. Most working single mothers are employed by establishments that pay more than the minimum wage because they have a higher education level.
  2. For less-educated single mothers, there were negative employment and hours effects.
  3. Many single mothers are not working at all.

For single mothers who had not completed high school, a 10 percent increase in the minimum wage yielded a 9.9 percent increase in wages, but no reduction in poverty. This is evidenced by the adverse employment affects, in which they found that a 10 percent increase in minimum wage resulted in an 8.8 percent decrease in employment, and a 11.8 percent decrease in annual hours worked. Because single mothers with at least a high school education worked more (an average of 32.3 hours per week) than less-educated women, these women generally make higher wages and thus no real treatment effects were observed.

And so, the battle wages on in the literature. As it does in Massachusetts, where the people on the ground are making their voices heard by demanding economic justice for all.

 

Published On: November 16, 2017 |
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