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STUDY: States with Higher Minimum Wage Have Had Less Employment Loss During the Great Recession

Because attempts to increase the minimum wage are being met head on by the GOP talking point that doing so would cause employers to cut jobs and hours, the Massachusetts Budget and Policy Center looked at two decades of data in their recent report, The Minimum Wage and Job Creation.

The study found that minimum wage increases have not had a negative effect on employment in New England.

In Massachusetts alone, the minimum wage has increased six times since 1995. During this period, growth in industries with concentrations of high minimum wage earners has been higher than total employment.

For many years the Massachusetts minimum wage was the same as, or close to, the federal minimum wage level. Legislation passed in 1995 increased the state’s hourly minimum wage from $4.25 to $4.75 starting in January, 1996 and to $5.25 in January, 1997, slightly ahead of increases in the federal minimum wage. Two sets of subsequent increases followed during the next decade—to $6.00 and $6.75 in 2000 and 2001, and to $7.50 and $8.00 in 2007 and 2008. Figure 1 shows the change in employment levels for all industry sectors and for sectors with high and low concentrations of minimum wage workers from January 1995 to January 2012.1 During the first part of this period, in the 1990s, all sectors—including those with a high concentration of minimum wage workers—experienced roughly similar growth levels, despite implementation of a higher minimum wage.

The minimum wage increases that went into effect in 2000-01 were followed by a slight dip in employment levels for sectors with higher concentrations of minimum wage workers, and a deeper dip followed the phase-in of the 2007-08 increase. However, sectors with low concentrations of minimum wage workers experienced much deeper declines during these periods. The declines in both sets of sectors were at least partly the result of recessions that began in March of 2001 and December of 2007, but by January, 2012 the low wage job sector had recovered the jobs lost during the recession, in contrast to other sectors. This experience suggests that the six increases in the minimum wage have not impeded growth in jobs for minimum wage workers. In fact, a recent analysis of the effects of a potential increase in the national minimum wage to $9.80 suggests that such an increase could help stimulate the local economy.

In New England, all six states have different minimum wages. While all felt the effect of the Great Recession, states with higher minimum wages have experienced smaller drops in employment. As you see in the study’s second graph (above), New Hampshire, which increased its minimum wage the most during the recession, enjoyed the lowest levels of job loss.

Read more of the study’s findings here.


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