DC Pulls Trigger On $15 Minimum Wage, Hits Young, Low-Skilled Workers by Charles Hughes, Foundation For Economic Education
The Effect on Restaurant and Retail Jobs Will Not Be Good
Yesterday the D.C. City Council unanimously approved a measure that would gradually raise the $10.50 minimum wage to $15 by 2020, and then index future increases to changes in the Consumer Price Index. These new scheduled increases will come on the heels of an already significant 39 percent increase currently being phased in. With the passage of this bill, D.C follows California and in passing substantial minimum wage hikes beyond the scope of past experience in the U.S. The related adverse disemployment effects will primarily impact younger workers and people with limited job skills or educational attainment, putting the important first rung of the job ladder out of reach for many of them.
While proponents of an increase tend to focus on families, roughly half of min wage workers are between 16 and 24, and a more than one-fifth are teenagers. People lacking a high school diploma are more likely to be in minimum wage jobs, and even with some recent incremental improvements, the 4-year adjusted cohort graduation rate for D.C. public schools is only 64.4 percent and for African-American students it is less than 62 percent.
While the aggregate unemployment rate for the District might not seem alarmingly high at 6.4 percent in April, there is a lot of variation between the eight wards, with the unemployment rate as high as 9.9 percent in Ward 7 and 12 percent in Ward 8. One survey found that almost half of responding businesses had already reduced staff or hours to cope with the first raft of minimum wage increases. Younger workers and people with limited educational attainment will find it increasingly difficult to find employment as labor costs continue to surge.
These minimum wage jobs often play an important role in helping people develop the skills they need to eventually move on to more lucrative and promising jobs, far from being a dead-end where these workers get stuck forever. The majority of minimum wage workers that stick with it get a raise within a year. An earlier study looking at data from 1979 to 2002 found that almost two-thirds of minimum wage employees who continue working earned higher than the minimum wage within a year. More recently, 72 percent of minimum wage earners got a raise between 2014 and 2015. About a fifth of these people saw their earnings rise due to mandated minimum wage increases, but 57.5 percent of people working continuously got a raise or moved into a higher-paying job outside of those effects, and this share could have been even higher in the absence of those legislated minimum wage increases. Far from stagnating in these entry-level jobs, most of the people in these positions use these opportunities as a springboard to better things.
Supporters of the new bill may say that they want to ensure that hard work is rewarded and that people can support their families, but D.C.’s substantial min wage increases will make it much harder for many people, especially younger workers and people with limited job skills, to find any work at all.