News Release – Bluegrass Institute Scholar, business community warns: Minimum-wage hikes harm young, low-skilled the most
For Immediate Release: Monday, Feb. 16, 2015
Contact: Jim Waters @ (270) 320-4376
(BOWLING GREEN, Ky) – A new Bluegrass Institute report released today warns that raising the commonwealth’s minimum wage would not only harm most the people it’s meant to help – including young and low-skilled workers – but it would particularly harm Kentucky, which is among states with the highest percentage of minimum-wage employees in the nation.
“While raising the federal minimum wage hurts employment generally, it particularly harms it in Kentucky,” writes Western Kentucky University economist and Bluegrass Institute Scholar Brian Strow, Ph.D., who authored the report. “The states that see the largest escalation in unemployment from a minimum-wage increase are those with the lowest wages, which is why Kentucky’s unemployment rate spikes relative to the U.S. rate when the federal minimum wage is increased.”
The report was released today as part of an online tele-press conference with reporters and speakers, including Strow, Reps. Adam Koenig, R-Erlanger, and Jerry Miller, R-Louisville and representatives from Greater Louisville Inc. (GLI), the River City’s chamber of commerce agency.
The Kentucky House of Representatives on Tuesday passed a minimum-wage hike largely along party lines. House Bill 2, which passed 56-43, raises the commonwealth’s minimum wage from its current $7.25 per hour to $10.10 per hour.
“Despite our best efforts, the Kentucky House has chosen to advance this piece of the Obama agenda,” said Miller, who, as a Louisville Metro Council member, fought that body’s 16-7 decision in December to raise Jefferson County’s minimum wage to $9 by 2017 with the wage to continue to rise beginning in 2018 based on the consumer price index each year. The ordinance also includes minimum-wage protection for workers who receive tips.
Miller is hopeful the increase loses steam in Frankfort during the current legislation session.
“While we lost this battle in the Kentucky House, the war against this ill-advised increase of the minimum wage now moves to the state Senate,” he said.
Representatives from the business community also are concerned about the impact that a Frankfort-mandated wage increase would have on the commonwealth’s economic competitiveness.
“A statewide increase in the minimum wage will put Kentucky businesses at a distinct competitive disadvantage compared to our neighboring states,” said Sarah Davasher-Wisdom, vice president of government affairs and public policy at Greater Louisville Inc. (GLI), the River City’s chamber of commerce agency. “GLI contends as a community we must be focused on pro-growth policies, not policies that limit business attraction and create barriers for businesses that have chosen Louisville and Kentucky as home.”
Strow notes that raising Kentucky’s minimum wage to $10.10 during the next three years – as the House legislation does – would cause more job losses than smaller increases, including the Louisville Metro Council’s lesser wage hike.
He also predicts that the negative impact on Kentucky’s economy could be even greater if Frankfort decides to follow through on a proposal to raise the minimum wage statewide without a corresponding federal increase.
“Past minimum-wage hikes have resulted in an additional .2 percentage-point increase in Kentucky’s unemployment rate relative to the rest of the U.S.,” he writes. “The states that see the largest escalation in unemployment from a minimum-wage increase are those with the lowest wages, which is why Kentucky’s unemployment rate spikes relative to the U.S. rate when the federal minimum-wage is increased.”
The study also speaks to the potential threat that such wage mandates pose to certain industries, especially those that rely on low-skilled, low-cost labor.
Noting that “the average textile industry worker currently makes $8.94 an hour,” Strow cautions that “increasing labor costs to $10.10 an hour may be enough to ensure the extinction altogether of that industry in Kentucky as the jobs could be outsourced to lower-wage countries over time.”
Strow anticipates that young Kentucky workers will be most harmed by such a steep increase in the minimum wage, noting that youth employment between March 1990 and July 2014 fell from 47.1 percent to 27.1 percent, meaning that 44.8 percent of teenagers who held a job in 1990 no longer held one in 2014.
“Youth employment is almost half of what it was 25 years ago,” he said. “A climb up the income ladder begins by placing one’s foot on the lowest bar. If society truly wants more people moving up the income ladder, it must stop removing the lowest rungs of that ladder.