The minimum wage increase that resulted in padded pocketbooks for some Ball State University students inadvertently cost others their jobs.
According to a study released Sept. 24 by Ball State's Bureau of Business Research, July's minimum wage increase was responsible for the loss of about 160,000 jobs in the U.S. and 8,075 in Indiana.
Director of BBR Michael Hicks said the vast majority of the jobs were minimum and low wage jobs in the food service and retail sectors.
He said he was aware of the minimum wage increase months before it happened, knew it would likely result in job losses and wanted to do a study about its effect on unemployment rates. He said he gathered information from monthly federal government data about minimum wages and unemployment rates.
"One hundred sixty thousand doesn't surprise me," he said.
The bureau helped him gather the information, he said, but he wrote the report himself. He was preparing since spring - reading up on the issue - but writing the report took him a few hours, he said.
Part of the problem, he said, was that the increase came during summer, when companies had more casual workers that were easy to let go without replacing. Companies made up for the lost manpower by increasing hours for remaining employees. Few, if any, would be laid off because of minimum wage increase, he said.
Freshman chemistry education major Zach Crimmins said he has worked at Bicycle Garage Indy since he was 14. When he left or cut hours for school, his hours were taken by the rest of the staff, he said.
If the increase came in another season, he said, the loss wouldn't have been as bad.
Hicks said the problem seemed worse than it was and the loss of minimum wage jobs wouldn't run the economy into or out of a recession.
He said if an adult is working at a minimum wage job, he or she should go back to school. Between 1 1/2 and 2 percent of people over the age of 25 have minimum wage jobs, he said. The job losses almost exclusively affected college students and teenagers, he said.
"When we spend $100,000 on someone's education, K-12, and they only produce minimum wage," Hicks said, "that's about as bad as it gets ... If you graduate college and you need a minimum wage job, you wasted your time."
Senior architecture major, Jennifer Millikan, said the minimum wage increase was somewhat of a contradiction.
"That's a hard issue because minimum wage is hard to live off of," she said, "but if you raise it, you lose jobs."
Hicks said an alternative to increasing the minimum wage would be to combine a negative income tax with the low wages. Negative income tax means the federal government would pay low wage workers rather than taxing them. Their extra income would help to stimulate the economy, he said.
Another solution would be to exclude low wage workers from the Social Security tax, he said. The tax is 15 percent of workers' income. Letting those in low and minimum wage jobs keep what would normally go to Social Security would be an adequate way to increase their income without much effect on the Social Security fund, he said.
"[Increasing the minimum wage] is just not the most effective way to help people," Hicks said.
Read More
Three Air Jam teams take home the win
October 12, 2012Nineteen teams shimmied, shook and flipped for a sold out John R. Emens Auditorium on Thursday night during the 25th annual Air Jam.
Bill Clinton Speaks at North Central High School
October 12, 2012Former President's Speech Could Have Effect on State Senate Race
