Increases of the minimum wage could have led to the elimination of 550,000 jobs, according a recent Ball State University study.
Raising the minimum wage to its current level of $7.25 during the recent recession caused some businesses to scale back on filling vacant positions or eliminate jobs altogether, according to a recent study from Ball State's Center for Business and Economic Research.
The increase in minimum wage resulted in high unemployment rates among teenagers and young adults, CBER director Michael Hicks said.
The study was conducted on part-time workers monitored by the Bureau of Labor Statistics from 1999 to 2009.
The federal minimum wage increased to $7.25 per hour in 2009 in the final step of a three-stage increase passed in 2007 when the minimum wage was only $5.15. But minimum wage increases before 2007 had a small impact on employment because few workers were employed at the minimum wage, Hicks said.
"When the minimum wage for unskilled workers surpassed what companies were able to pay during the recession, employers started cutting back," he confined. "Instead of hiring a dozen teens to work a popular summer restaurant or theme park, a company would hire six or less. Instead of filling positions that required no skills, companies were making due with what they had. In the long run, this hurts young, unskilled workers."
Reducing the minimum wage for students and creating new hires could preserve jobs, Hicks said. He also recommended introducing a tenure scaled minimum wage, which would remove the disincentive for employers to hire unskilled workers. Unskilled workers could be hired at lower wages but be paid more after 90 to 120 days of employment.
"Both of these policy recommendations would create different tiers of workers," he said. "While this is not typically a desirable outcome of legislation, it is a vast improvement on the current legislation, which has its own tiers of workers: those with jobs at the minimum wage, and those without jobs who would be willing to work at wages beneath the current federal minimum wage."
The study also reported that:
About 67 percent of teenagers and young adult minimum wage workers live in households with incomes at least twice the poverty level (for example $44,000 for a family of four).
Adult workers with limited skills earn minimum wage.
About two-thirds of all adult minimum wage workers have a high school degree or less.
One benefit of minimum wage is that it keeps some of these workers out the labor market and allows them to obtain additional education and training in the workforce development network.
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