“A minimum wage increase doesn’t kill jobs,” said Reich, chair of UC Berkeley’s
Center on Wage and Employment Dynamics (CWED). “It kills job vacancies, not jobs. The higher wage makes it easier to recruit workers and retain them. Turnover rates go down. Other research shows that those workers are likely to be a little more productive, as well.”
The federal minimum wage has been $7.25 an hour since 2009, but California and dozens of state and local governments in recent years have raised their minimum to $15.50 or more.
The new working paper is the first ever to examine the impact of higher minimum wages on small, low-wage businesses, a sector that includes restaurants, grocery and retail stores, and child care operations. It’s the second recent study by Reich and co-authors that challenges the conventional wisdom on minimum wages.
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working paper released last fall and revised in December found that $15-an-hour and higher minimum wages in California and other states and cities gave employees more financial security without causing their employers to cut jobs. (An updated version of that paper will be released in coming weeks, Reich said.)
Business groups have long warned that teen workers would be the most likely to lose their jobs when employers confronted higher minimum wages. But Reich and his colleagues found that higher wages often allowed teenage employees to work a little less and study more.
The findings have dramatic implications for public policy: Most obviously, higher wages reduce poverty and financial insecurity. But, Reich said, governments currently spend millions of dollars every year on tax breaks for businesses confronted with government-approved minimum wage hikes. Those expenses may be unnecessary, he said.
