Who Wins and Who Loses With a Minimum Wage Hike
If the wage rises to $5.15 an hour, the most affected will be women, Southerners
A HANDFUL of workers at Balliet's, a women's specialty store in Oklahoma City, will be cheering. But employer H. James Baum, who runs a family dry-goods store in Morris, Ill., balks at the idea.
Views on hiking the minimum wage from $4.25 per hour to $5.15 an hour depend largely on whether you're giving or receiving the raise.
If Congress moves ahead - as it now appears ready to do - economists say the wage hike will have selective and subtle impacts throughout the economy. Most affected will be the retail sector, which has the heaviest concentration of minimum-wage workers.
But it will also affect some regions of the country more than others, such as the South, and could prove a boon to women, minorities, and part-time students.
Nationwide, about 10 percent of the work force, or some 10 million Americans, now earn between $4.25 per hour and $5.14. Of those, about 44 percent work behind the counters in shops, malls, and restaurants.
Among those helped by a rise in the minimum wage would be gardeners and lawns keepers, who are considered to be agricultural workers. And farmers who employ more than 50 workers would have to start to pay the higher wage rates. This would impact large farms in California.
According to the Department of Labor, 50 percent of the workers who receive the minimum are women. Nearly 1 million of these are African-Americans and 750,000 are Hispanic. The most likely recipient has a high-school education and is a single head of household.
Regionally, a rise in the minimum wage would have a significant impact in the South. John Schmitt of the Economic Policy Institute in Washington says 16 percent of the workers in Arkansas, 20 percent in Louisiana, and 17 percent in Mississippi get the minimum rate.
In fact, some Northeastern Republican congressmen now claim they will vote for the higher wage because it will not impact their own districts much but will raise the cost for factories in the South. But this is only partly true. For example, 16 percent of all workers in West Virginia and 17 percent in Oklahoma receive the minimum wage.
Economists are divided over the overall impact of a rise in the minimum wage. The Labor Department, a proponent of the increase, says there would be no meaningful change.
The increase would result in a gain of $1,800 per year for the workers. "No one says they are going out to dinner more often on this money," says a Labor Department spokesman.
But economist David Neumark of Michigan State University in East Lansing says there have been subtle shifts in the workplace after past increases in the minimum wage.
He says one of his studies in the early 1990s confirmed that a rise in the minimum wage does in fact reduce employment of teens and young workers.
"Every 10 percent increase in the wage, results in a 1 to 2 percent decrease in teen employment," he says. He has also found that increases in the minimum wage adversely affect least-skilled teenagers the most. As these teens lose their jobs, employers increase the hours for teens who are in school and working part-time. As a result, these teens leave their jobs.
There have been a few studies of the impact on teens in states that have raised the minimum wage. One study in New Jersey compared teens in the fast-food industry with teens in Pennsylvania. It concluded there was no significant impact. But Mr. Neumark conducted his own study as well. He found that Garden State teenage employment decreased relative to the Keystone State.
Although a rise in the minimum wage may make it more expensive for a shop owner to do business, economists do not expect the proposed hike to result in higher prices.
Gary Burtless, an economist at the Brookings Institution in Washington, predicts the price impact will be "pretty low," based on the fact that on a dollar basis the minimum wage represents less than 1 percent of the compensation of all workers.
But he admits there might be some areas, such as dry cleaning, child care, or motel maid service, where prices have to rise to reflect higher wages. "But I don't see a big overall impact," he concludes.
Still, this is not the way Robert Benham, owner of Balliet's, sees it. He says any increase in the minimum wage creates pressure all the way up the wage ladder.
"If the bottom rung goes up, the top rung will go up as well, that is where the real problem is," he says.
Not surprisingly, other retailers oppose a rise, too. "Our position is well established ... the Federal government should not be engaged in setting wage rates on any level as they do now," says Tracy Mullin, president of the National Retail Federation in Washington.
If wages are increased, some child-care workers are likely to be among the beneficiaries. According to Claudia Wayne of the National Center for the Early Childhood Work Force, the median average pay for child-care workers is $6.70 per hour.
She estimates about one-third of all the child-care workers would get an immediate increase. Included would be unlicensed day-care workers, many of whom are people on welfare.
*Intern Nicole Gaouette contributed to this story.