Minimum wage increase may backfire for blacks
Although some workers are worried about their paychecks for next year, more than a million other workers across the country will see their minimum wage rate rise starting on New Year’s Day. Yet many experts say African-Americans workers may not benefit as greatly from the increase.
The state laws of “Arizona, Colorado, Florida, Montana, Ohio, Oregon and Vermont are requiring that minimum wage rates be tweaked every year due to the rising cost of living. These states have rates above the federal minimum wage rate, which is $7.25 — totaling to an annual income of about $15,000.
Although the increases will be modest— adding only 28 to 37 cents per hour— the new rates will essentially give workers in this handful of states hundreds of dollars more than those in states who will maintain the same minimum wage levels.
Washington, which has the highest minimum wage rate in the country, will set the benchmark by becoming the first to crack the $9 minimum wage rate from $8.67 to $9.04.
Additionally, according to the National Employment Law Project, the small boosts for 2012 are estimated to add an extra $582 to $770 a year onto the paychecks of full-time workers.
Workers in the states mentioned above are getting raises due to the cost-of-living adjustments written into their state laws, which require that the minimum wage be tweaked every year to account for the rising cost of basic necessities, usually fixed to the consumer price index.
“Increasing minimum wage is a key form of local stimulus,” Paul Sonn, legal co-director at NELP, said to CNN Money. “It helps front-line workers whose wages have been stagnant and falling by putting more money into the pockets of low income families who then spend the money at local businesses.”
Workers who are considered low-wage have median wages under $13.52 an hour. They have continued to suffer wage decline by 2.3 percent since the recession began, NELP told CNN Money. Additionally, nearly 80 percent of the low-wage workers impacted by the increases are over the age of 20, and 78 percent work at least 20 hours per week.
However, experts say the minimum wage raises are not that significant.
Sonn told the Huffington Post that the country’s recent minimum wage increase does not even compare with its historical highs when adjusted for inflation. He asserted that if the minimum wage rate kept pace with the rising cost of living since the 1970s, it would presently stand around $10 an hour.
Some cities that are not pleased with the rates set by their state governments have reportedly passed local ordinances to establish their own minimum wages. One of these cities included, San Francisco, which will soon become the first major city with a minimum wage higher than $10.
Interestingly, many do not realize that part of the inspiration for these increases is the payroll tax cut issue.
If the payroll tax extension isn’t approved for all of 2012, an estimated 160 million Americans could see a reduction in their paychecks. In fact, lower-income Americans could lose thousands of dollars in income, while workers making over six-figures could see their paychecks be reduced by hundreds of dollars a year.
“The eight states that are raising the minimum wage on January 1st are protecting themselves in case Congress can’t get its act together again to extend the payroll tax break beyond February,” Sonn said to CNN Money.
Though many will benefit from the “protection” of these minimum wage increases, some experts say that African-Americans may suffer.
According to a research study called Minimum Wage Effects in the Post-welfare Reform Era done by the Employment Policies Institute, minority minimum wage workers will be the most impacted by the increase. The Employment Policies Institute is a non-profit research organization dedicated to studying public policy issues centered on employment growth and entry-level employment.
One of the institute’s researchers, David Neumark, found that even “a 10 percent increase in the minimum wage will decrease minority employment by 3.9 percent, with the majority of the burden falling on minority teenagers by 6.6 percent.”
In addition, the study revealed that for every 10 percent increase in the minimum wage, African-American or Hispanic males aged 16 to 24 and 20 to 24 experienced a decrease in employment by 6.3 percent and 5.5 percent respectively.
The data supports earlier research that the existence of minimum wage has had the largest negative effects on low-skilled employees, such as teens and minority teens.
Walter Williams, who is a George Mason University economics professor and a columnist for the Washington Examiner, has done extensive research supporting that Africans-Americans are negatively impacted by minimum wage.
Recently, Williams provided many historical reasons in his article Why the Minimum Wage Keeps Blacks Jobless that support the study previously mentioned.
According to Williams, the National Industrial Recovery Act of 1933 and the Fair Labor Standards Act of 1938 broadened the number of workers covered by minimum wages, but it gave negative consequences for black employment in numerous industries. African-Americans suffered since many lacked the skills that employers knew workers of other races had.
Williams emphasized that most employers viewed hiring such a worker as a losing economic proposition. As a result, a minimum wage law discriminates against low-skilled workers— who are mostly African-Americans—by reducing employment opportunity.
That’s seen by putting oneself in the place of an employer and asking, “If I must pay $7.25 an hour to no matter whom I hire, does it pay me to hire a worker who’s so unfortunate as to have skills that enable him to produce, say, only $4 worth of value an hour?”
Although reports claim that the minimum wage increase will help numerous workers keep their jobs and have higher pay, it is only once raises take effect that the nation will actually see the impact.