NFIB Research Foundation Report on the effect of raising the minimum wage in Pennsylvania

Date: March 24, 2014

HARRISBURG, March 24, 2014 - A handful of bills have been introduced in the Pennsylvania legislature to raise the state’s current $7.25 minimum wage. Advocates claim that will help to bring people out of poverty.  But a reliable economic model used in an NFIB study released today finds that minimum wage increases in Pennsylvania will actually hurt those they are intended to help by eliminating entry level jobs in the Commonwealth.

The National Federation of Independent Business Research Foundation report projects the effect that three Pennsylvania minimum wage bills will have on jobs and economic activity in our state. The findings forecast the loss of as many as 28,000 to 119,000 jobs over a ten year period when the wage is increased to $8.75 or $9.00, as those increases are tied to cost-of-living adjustments. The report uses a widely accepted regional economic model that is also used by the federal government, local governments and universities created by REMI, Inc. (see  Earlier this year a Congressional Budget Office report on raising the national minimum wage to $10.10 projected 500,000 job losses in the U.S.

“The NFIB study shows that more than half of the jobs would disappear from the small-business sector in Pennsylvania,” said Kevin Shivers executive state director of NFIB Pa., “While minimum wage hikes are intended to help those below the poverty level, they will do just the opposite.

“Small-business owners will ultimately hire a more skilled employee rather than pay someone with no skills and no experience higher wages. Unlike corporations, small businesses operate on a slim profit margin and tough decisions will have to be made.

“The actual costs of a minimum wage increase will be higher for small businesses because employees who make over the minimum won’t want to be paid the same as a co-worker with less experience, so the full pay scale is likely to be adjusted” said Shivers.

NFIB believes small-business owners are likely to cut hours and reduce hiring. It will become even harder for the unemployed or teenagers to find an entry level job. Companies may invest in technology to replace low level jobs. Business owners may also be forced to raise prices which will negatively affect all consumers, especially the poor.  The sectors most affected by a minimum wage increase are restaurants, service businesses and those in the amusement industry.

A 2012 report from the Bureau of Labor Statistics shows people under age 25 fill just over half of the minimum wage jobs and their average household income is about $66,000 a year. Of those over 25, 75% have household incomes above the poverty level. Only 16% of minimum wage workers are sole income earners with dependents.

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