Minimum Wage

Reductions in child poverty not a result of minimum wage increases

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Last month, the Maine Center for Economic Policy (MECEP) published a study on the minimum wage in Maine, arguing that its effects on low-income families and children are overwhelmingly positive. Regular readers of the Maine Wire may recall a similar article last spring. It seems that time hasn’t improved the quality of MECEP’s work.

MECEP’s report claims that new data from the Census Bureau “shows that as a result of the minimum wage increase, wage growth in Maine was concentrated among the lowest-paid workers.” MECEP offers no evidence to support its claim that wage growth is causally connected to the minimum wage. At best, its analysis shows that the two are correlated in time, but other data that MECEP conveniently ignores indicates that the labor market for low-skill Mainers has actually deteriorated since 2016.

For example, the Census Bureau reports that the percentage of households in Maine earning between $10,000 and $15,000 — among those MECEP predicted would benefit the most from a higher minimum wage — actually grew by more than 1,600 from 2016 to 2017, suggesting that minimum wage workers are facing cuts to their hours and declines in their earnings.

To support its argument, MECEP misrepresents a recent study and claims that “increases in the minimum wage simply lead to workers being paid more” without negative employment effects. The study they cite from the National Bureau of Economic Research (NBER) does conclude that higher minimum wages’ effects on total employment seem to be close to zero, but it also notes that “the minimum wage is likely to have a negative effect on employment in the tradable sector, and manufacturing in particular.” This is an important finding, given the challenges our manufacturing sector faces. MECEP chooses to gloss over it.

It’s also important to note that the NBER study MECEP relies on is not representative of the views of most economists. The majority of studies have concluded that minimum wage laws reduce hiring, hurt businesses (especially small businesses), and make it harder for low-skill workers to get into the labor market.

MECEP also attributes a sizable drop in child poverty to the higher minimum wage. The mere fact that a drop in child poverty corresponds with a minimum wage increase is not, of course, evidence that the two are causally linked. MECEP fails to acknowledge, for example, that Maine was one of 16 states to see declines in child poverty from 2016 to 2017, the vast majority of which did not change their minimum wage. On the other hand, some states that implemented sizable minimum wage hikes in 2017 actually saw increases in their child poverty rates (like Hawaii), while many more failed to detect any significant change at all.

MECEP consistently cherry-picks data that point to improving labor market conditions for low-wage workers while failing to recognize contradictory trends. For example, preliminary data suggests that fewer low-wage jobs were available in 2017 relative to 2016. After the minimum wage increased from $7.50 to $9 in 2017, the Bureau of Labor Statistics reported 40 fewer dishwashers, 490 fewer cashiers, 760 fewer bartenders, and 110 fewer ushers and ticket takers than a year before. The list goes on. Employment opportunities for low-wage workers worsened in the aftermath of the minimum wage increase.

Finally, MECEP’s paper fails to account for the fact that Maine — driven by an improving economy nationwide — experienced exceptionally strong growth in 2017. This makes it very difficult to separate the effects of the minimum wage from the effects of overall growth. MECEP makes no attempt to parse the two. This fundamental flaw, coupled with MECEP’s refusal to account for the data presented above, should lead us to seriously question MECEP’s conclusions.

About Liam Sigaud

Liam Sigaud is a former policy analyst at The Maine Heritage Policy Center. A native of Rockland, Maine, he holds a B.A. in Biology from the University of Maine at Augusta and has studied policy analysis and economics at the Muskie School of Public Service at the University of Southern Maine. He can be reached by email at liam.sigaud@maine.edu.

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