Badger Institute says raising minimum wage would cost jobs

The conservative Badger Institute estimates raising the state’s minimum wage to $15 an hour would put 350,000 Wisconsin jobs at risk, with most of the projected job losses happening at lower income levels.

Gov. Tony Evers has proposed upping the minimum wage from its current $7.25 level to $10.50 by 2023, as part of a transition toward a $15 hourly wage. And other states such as California, Massachusetts and Illinois are all on track to have a $15 hourly wage in the near future.

Republican lawmakers in the state have said Evers’ plan would hurt businesses in the state by raising costs, while Dems argue an incremental approach to raising the minimum wage would benefit workers and the communities in which they live.

The new report from the nonprofit Badger Institute claims 350,000 workers would lose their jobs if the state’s minimum wage was raised to $15 an hour. Study authors say half of those jobs would be lost by the state’s poorest residents, with incomes in the bottom 10 percent of the income distribution.

The report was authored by economists Ike Brannon and Andrew Hanson, two Badger Institute visiting fellows. They wrote in their analysis that 50 percent of all affected workers in food preparation and service would lose their jobs.

Brannon and Hanson frame the minimum wage as “an exceedingly blunt tool for dealing with the complex problem of poverty.”

As an alternative, they propose expanding the state’s Earned Income Tax Credit to be “more generous” at lower income levels. They say it could be phased out more slowly, and generally expanded to more households.

“It makes more sense to have the state’s businesses and individual taxpayers pay the cost of boosting low-income wages rather than, as per the minimum wage, impose it primarily on retail establishments and other businesses with a preponderance of low-skilled jobs,” they wrote.

In their analysis, the economists projected the state’s western and northwestern regions would see the greatest job losses, while the Madison area — which has a more robust labor market and higher wages — would see the least. They say some rural communities would lose 10 percent of their working population as a result of the increased minimum wage.

The study authors say practically doubling the minimum wage could push businesses to substitute skilled labor with minimum wage workers, or replace certain workers performing unskilled tasks with automated systems. As an example, they point to McDonalds replacing their cashiers with touch screens — “a fate soon to befall hamburger flippers as well.”

Wisconsin currently has about 2.8 million employed people. Data from the Bureau of Labor Statistics show 38 percent of that number, or 1.1 million people, currently earn less than $15 an hour and would be affected by the increase.

While the study authors estimate food industries would lose as many as half of their workers, other top areas for job losses include sales, building and grounds cleaning and maintenance, office and administrative support, and transportation.

Study authors say employers in these areas are likely to not only lay off the youngest and least productive workers, but also to reduce working hours for remaining workers. And they say employers might reduce non-wage benefits such as health insurance to balance out the higher payroll costs.  

See the full report: