Summary of Minimum Wage Indexing
In 2009,the Employment Policies Institute (EPI) released Impact of Minimum Wage Indexing on Employment and Wages: Evidence from Oregon and Washington,which reviews previous studies concerning on minimum wage indexing policy.
Minimum wage indexing policy has been recommended for years.But until 2009,only three states had passed automatic escalators—Washington (in 1999), Oregon (in 2002), and Florida (in 2004). An indexed minimum wage fluctuates with the CPI.That’s to say an indexed minimum wage may be a little higher than the federal minimum wage,because of the inflation trend,which has been proved.
Nine topics are discussed in the article as follows.
Topic 1.What’s Going on in the States with Indexing Laws?
Topic 2.Does the Low Wage Workforce Benefit from Indexing?
Topic 3.How Does Indexing Fail to Reduce Poverty?
Topic 4.Does Indexing Overstate the Effects of Inflation?
Topic 5.What About People who do Earn the Minimum Wage?
Topic 6.Won’t Raising the Wage make Productivity Increase?
Topic 7.When does a $1.00 Wage Hike Equal a Dime?
Topic 8.Can Indexing Respond to a Bad Economy?
Topic 9.Is There a Better Alternative?
The findings are not as optimistic as policy makers wish. In Washington, teen unemployment skyrocketed by 58 percent since the state implemented indexing, 24 percent higher than the average for non-indexed states. Oregon, often trumpeted as an indexing success story, now faces tough times. The state has seen consistent job losses with total unemployment rates surpassing most of the country. Since indexing was implemented in Florida, that state’s unemployment rate has gone up 14 percent, exceeding the national average of non-indexed states by 13 percent.
Other key findings
For every 100 workers affected by minimum wage, only 15 are single parents who are supporting children. The other 85 workers are not the actual intended targets of the policy.
When the CPI overstates inflation, indexed minimum wages lead to greater unemployment and inflated prices in areas with high concentrations of minimum wage labor.
A family taking advantage of all benefit programs and subsequently receiving a mandated increase in the minimum wage would lose 50% to 100% of every extra dollar earned (up to about $15.00 per hour).