Responses to a higher minimum wage

Efforts to increase the minimum wage are taking place around the country, including here in North Carolina. Workers in minimum-wage jobs benefit from a higher wage rate, but some say there are downsides related to the impact on prices and to employment in minimum wage jobs. NC State University economist Mike Walden considers the evidence.

“Well, this has been a subject of intense and widespread economic research over really the last 60 years. There are a lot of studies out there. I am going to quote a new one from the Employment Policy Institute. It’s very well done, very comprehensive.

“And in addressing both the questions, let’s first look at the impact on prices. What the Employment Policy Institute found is that for every increase in minimum wage of 10 percent, it will result in restaurant prices —and of course restaurants are where a lot of minimum wage folks work — it will result in an increase in restaurant prices of actually less than 1 percent — .7 percent.

“Now outside of restaurants, it will result in a increase in prices of 1.6 percent.

“So again, 10 percent increase in minimum wage, restaurant prices go up by a little less than 1 percent; prices outside of restaurants go up by 1.6 percent.

“In terms of employment, the research did find that when the minimum wage does go up, you will see a reduction in employment. And again looking at that 10 percent increase in minimum wage, what the Employment Policy Institute found is that employment among minimum wage workers will go down by somewhere between 2 percent and 2.5 percent.

“So again, these are numbers that instead of talking about generalities you can actually apply, and again we can see there are both pluses and minuses to increasing the minimum wage.”