After the ball dropped on New Year’s Day, 18 states and 20 municipalities rang in the new year with minimum wage increases.
While workers will see a slightly bigger paycheck at the start of the year, in the longer term they may receive pink slips and fewer opportunities. Young women are especially likely to lose out.
Many of the wage increases are being phased in over several years. This week’s increases are a step in that direction.
Let’s look at some numbers on 2018 wage increases:
- 9: The number of states raising the minimum wage by at least 50 cents (Arizona, California, Colorado, Hawaii, Maine, New York, Rhode Island, Vermont, and Washington).
- $11.50: The highest hourly state minimum wage (Washington)
- 5: The number of states that approved rate increases via ballot initiatives (Arizona, Arkansas, Colorado, Maine and Washington)
- 9: The number of states with automatic rate increases based on cost of living (Alaska, Florida, Missouri, Montana, New Jersey, Ohio and South Dakota)
- 13: The number of cities where the minimum wage is already $12 or higher
Alaska, Florida, Michigan, Minnesota, Missouri, Montana, New Jersey, Ohio and South Dakota raised the minimum wages by less than 50 cents.
Understandably, many workers are looking forward to the small bump in their pay.
New York state raised its minimum wage for fast food works outside of the city from $10.75 to $11.75 and it will rise until hitting $15 an hour by July 2021. One 20-year-old Dunkin Donuts worker earning $11.50 an hour expressed her excitement:
“There’s things out here that are expensive, and you can’t afford [them],” said [Nyiasha] Colon, who recently joined the Fight for $15 movement to lobby for higher wages. “I don’t have a coat for the winter or boots for the winter, and I take the bus.”
While it’s a struggle for workers like Ms. Colon to live in an expensive area like New York City, the struggle may become protracted by the very wage increase she’s looking forward to.
Analysis and anecdotes from cities and states that implemented higher minimum wages have demonstrated that workers lose jobs, see pay cuts from lost hours, and lose out on new opportunities. Customers also pay higher prices as employers pass wage increases onto them, which puts added pressure on family budgets. Don't be surprised if corner stores bump up the cost of snacks and drinks, day care centers raise childcare prices per kids, and nail salons raise the prices of manicures and pedicures.
Analysis of California’s minimum wage increase, which is on its way to $15 an hour by 2022, projects that nearly 400,000 jobs will be lost over the next few years. The industries most heavily impacted are those that workers like Nyiasha work in. Nearly half of the observed job losses will occur in foodservice (123,000) and retail industries (77,000).
Losing a job is bad, but seeing your entire industry become obsolete is worse. Economists have studied employment data from the past few decades and found that for lower-skilled workers, higher minimum wages encourage employers to automate – eliminating their jobs.
If we want to make paychecks bigger for Nyiasha, we should cut her taxes at the federal and state/local levels. Thankfully, income tax cuts are expected to kick in for many American families as early as next month. However, the short-term bump in pay from minimum wage increases may speed up long-term opportunity losses for young women.