Evidence keeps rolling in against proposed minimum-wage increase

from Grassroot Institute of Hawaii, June 17, 2022

There is still time for Gov. David Ige to reject the 2022 Legislature’s bid to increase Hawaii’s hourly minimum wage by almost 20% to $12 starting Oct. 1, and almost 80% to $18 by 2028.

The Grassroot Institute of Hawaii has already cited numerous studies showing how minimum-wage increases typically backfire on the people that they are supposedly intended to help. And now there is one more — “Evidence of the Unintended Labor Scheduling Implications of the Minimum Wage,” by Qiuping Yu, Shawn Mankad and Masha Shunko — which should be a cause to pause in the rush to implement HB2510.

This new study examined worker scheduling and minimum-wage data from 2015 to 2018 for 5,832 employees at 47 stores in California and 17 stores in Texas, all belonging to a “medium-sized chain of fashion retail stores in the United States.” All the employees were paid by the hour, most of them at the minimum wage.

The control group was the stores in Texas, where the minimum wage of $7.25 did not change during the study period. The treatment group was the stores in California, where the minimum wage was constant in 2015 but increased every year thereafter. The key findings:

>> “As the minimum wage increases, firms may strategically adjust their scheduling practices to reduce the number of workers who are eligible for benefits.”

>> “Increasing the minimum wage leads to less‐​consistent worker schedules in terms of both the number of hours they work from one week to another and the timing of their shifts. … [This] deterioration of scheduling consistency is generally more severe for workers with a shorter tenure.”

>> “Increasing the minimum wage can diminish worker welfare due to the changes in firms’ scheduling practices, even when it does not reduce the overall employment.”

As the researchers stated: “For an average worker in a California store in our data, we estimate the net loss of welfare due to their reduction of hours, lower eligibility for benefits, and less-consistent schedules (that resulted from a $1 increase in the minimum wage) to be at least $1,599 annually, or 11.6% of the worker’s total wage compensation. This is assuming that workers were able to use their reduced hours to work a second job — an assumption that may not hold true for many workers.”

Read the entire study here.