Wednesday, May 25, 2011

During 2007-09, More Young Adult Black Males Lost Jobs From Minimum Wage Hikes Than Recession: Minimum Wage Hikes Increased Unemployment And Decreased Hours Worked For All Young Adult Males

From "UNEQUAL HARM: Racial Disparities in the Employment Consequences of Minimum Wage Increases" by William E. Even, Miami University and David A. Macpherson, Trinity University, May 2011, Employment Policies Institute:
Drs. Even and Macpherson focus on 16-to-24 year-old males without a high school diploma, a group that previous studies suggest are particularly susceptible to wage mandates. Among white males in this group, the authors find that each 10 percent increase in a federal or state minimum wage decreased employment by 2.5 percent; for Hispanic males, the figure is 1.2 percent. But among black males in this group, each 10 percent increase in the minimum wage decreased employment by 6.5 percent.

The effect is similar for hours worked: each 10 percent increase reduced hours worked by 3 percent among white males, 1.7 percent for Hispanic males, and by 6.6 percent for black males.
Across all 50 states and the District of Columbia, approximately 34,300 black young adults lost their job due to the recession; during the same time period, 26,400 lost their job due to minimum wage increases that occurred.

But the picture grows even more troubling when the authors focus just on the 21 states fully affected by the federal minimum wage increases in 2007, 2008, and 2009. Approximately 13,200 black young adults in these states lost their job as a direct result of the recession; 18,500 lost their job as a result of the federal wage mandate—nearly 40 percent more than the recession. In other words, the consequences of the minimum wage for this subgroup were more harmful than the consequences of the recession.
The authors offer a non-discriminatory reason for the disparity in unemployment rates; one out of three young black adults works in the low margin restaurant industry, which cannot afford to pay higher wages:
The authors find that they’re more likely to be employed in eating and drinking places–nearly one out of three black young adults without a high school diploma works in the industry. Businesses in this industry generally have narrow profit margins and are more likely to be adversely impacted by a wage mandate. There’s also substantial variation in regional location, as black young adults are overwhelmingly located in the South and in urban areas.

It’s also likely that unobserved differences in skill level and job experience play a role. To the extent that these differences are concentrated among young men of a particular race or ethnicity, this group would have the greatest risk of losing jobs when the minimum wage is increased.
Read the full 19-page report here.

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