Report: Minimum Wage Hike Could Cost Wisconsin at Least 350,000 Jobs

Demonstrators fighting for a $15-per-hour minimum wage march through downtown during rush hour on May 23, 2017 in Chicago
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Increasing the minimum wage to $15 per hour could cost Wisconsin at least 350,000 jobs, according to a new report published by the conservative think tank, the Badger Institute.

According to the analysis, "a high proportion of the state's workers—fully 38 percent—earn less than $15 an hour. Our modeling suggests that almost one-third of this group would be at risk of losing their jobs were Wisconsin to quickly increase the minimum wage – which amounts to 350,000 workers."

Increasing the minimum wage to $15 an hour is "tantamount to an hourly pay increase of 107 percent for workers currently earning the minimum wage," which is unsustainable for employers, the analysis argues.

Half of all job losses would come from the bottom ten percent of the income distribution, and 90 percent would come from the bottom quartile of the income distribution, the report states. The authors estimate that 50 percent of all affected workers in food preparation and service would lose their jobs.

Other major job losses would occur in building and grounds cleaning and maintenance, personal care and service, sales, office and administrative support, production occupations and transportation and material-moving industries.

Supporters of a minimum wage hike say it would lift the salaries of hundreds of thousands of Wisconsin workers

"This move would give a raise to 464,000 workers in Wisconsin, or about one out of every six workers," the Budget Project's Tamarine Cornelius said.

The Badger Institute's analysis calculated wage distribution statewide, both aggregated and across industries, from data obtained from the federal Bureau of Labor Statistics Occupational Employment Statistics output. The data set includes wage detail distribution at the state level at the 10th, 25th, median, 75th and 90th percentile.

The estimates account for a one-time increase with quick implementation similar to minimum wage increases implemented in New York or Seattle, and acknowledges that a slower implementation or phase-in would result in smaller job loss estimates.

In New York City, raising the minimum wage to $15 an hour directly led to loss of jobs in the restaurant industry, according to an online survey conducted by the New York City Hospitality Alliance, an association representing restaurants in the city. Restaurants are eliminating jobs, reducing employee hours and raising prices because of the higher costs imposed by the $15-per-hour minimum wage, they claim.

The data suggest that 89 percent of workers in food preparation and service in Wisconsin earn at or less than $15 an hour, which amounts to 217,765 workers, the report states, estimating that half would likely see their jobs eliminated.

Other industries with five-figure job losses include building and grounds cleaning and maintenance, personal care and service, sales, office and administrative support, production, transportation and material moving, according to the report.

The Badger Institute argues that employers in Wisconsin would try to economize in the new high-wage environment "not just by laying off the youngest and/or least productive workers but by reducing the hours of those who remain on the payroll."

In New York City, this is exactly what happened, the New York City Hospitality Alliance argues. Last year, "full-service restaurants recorded a 1.6 percent job loss, which is the first recorded annual loss in two decades," Andrew Rigie, executive director of the trade group, said. Rigie points out that 76.5 percent of full-service restaurant survey respondents reduced employee hours; 36 percent eliminated jobs in 2018.

The survey also found that 75 percent of limited-service restaurant respondents said they plan to reduce employee hours; 53 percent will eliminate jobs in 2019 because of the minimum wage hike.

A doubling of the minimum wage would also impact Wisconsin's budget, the institute argues, because fewer jobs for low-skilled workers would result in less payroll and income taxes. And those workers who lose their jobs would rely more on taxpayer-funded public support services.

Rather than increase the minimum wage, the institute argues that the Earned Income Tax Credit be expanded.

"The EITC has been shown to increase labor demand while boosting worker take-home pay, achieving the goals of $15 wage advocates—an increase in the pay of low-income workers—while avoiding its side effects," the report states.

The report cites data that has shown the EITC to offer better long-term outcomes for low-income households.

"That our politicians turn to such a blunt instrument as minimum wage to ostensibly 'save' money is both penny foolish and pound foolish," the authors of the report write. "Were the governor to announce he would abandon raising the minimum wage and instead embrace an EITC expansion, it would be difficult for the Republican-controlled Legislature to provide principled objections."

Published under: Minimum Wage