Connecticut’s minimum wage will rise from $16.94 to $17.48 an hour on Jan. 1.
The increase will occur without lawmakers voting on it, debating its economic consequences or examining whether previous increases improved the financial condition of low-income families.
That’s because a 2019 state law placed the minimum wage on autopilot. After a series of scheduled increases brought it to $15, annual adjustments became tied to a federal measure of wage growth.
The law requires the state labor commissioner to calculate the adjustment using the 12-month change in the federal Employment Cost Index for wages and salaries. The adjustment covers the 12-month period ending June 30, and the new rate must be announced by Oct. 15.
Supporters of indexing argue that it prevents the minimum wage from remaining stagnant as other wages, and expenses, rise. They point to the federal minimum wage, which has remained unchanged at $7.25 since 2009, as evidence of what can happen when every adjustment requires legislative action.
But Connecticut’s law operates on the assumption that regularly raising the wage floor will improve the lives of low-income workers. A new study suggests that question is far from settled.
In an August working paper released by the National Bureau of Economic Research, UC Irvine economics professor David Neumark and Emma Wohl examined how minimum-wage increases affected low-wage workers across different household income levels.
The researchers found that higher minimum wages were associated with a lower probability that low-wage workers remained employed, along with reductions in working hours and earnings. Those effects appeared across household income levels, including among poor and low-income families, although they were not consistently worse for the poorest workers.
The study also found no evidence that higher minimum wages reduced poverty, extreme poverty or near poverty. Although hourly wages increased, the researchers found that those gains did not translate into higher overall earnings. Earnings declined even among some low-wage workers who remained employed, which the authors attributed to reductions in working hours.
The report comes with caveats. It has not been peer-reviewed, relies on national data from 2003 through 2016 and wades into a long-running economic debate that remains unsettled. Other research has found that modest minimum-wage increases can raise workers’ pay without causing major employment losses.
Even so, the study raises questions Connecticut policymakers should not ignore, particularly because the state now has one of the country’s highest minimum wages and its wage floor increases automatically every year.
I’m not saying Connecticut should abruptly abandon annual adjustments. But the state should periodically examine how the 2019 law affects jobs, hours, earnings and employers.
That review should pay particular attention to small businesses, which often have fewer options than larger companies to absorb higher labor costs. Policymakers should examine whether annual increases are causing smaller employers to raise prices, reduce hours, slow hiring or cut other expenses.
If the policy is working as intended, the evidence should show it.
The state must also stop acting as though a higher wage floor can compensate for soaring housing, childcare, healthcare and energy costs. Those problems require direct solutions. More targeted measures, including tax relief for low-income workers, may provide help without putting their employment at risk.
Raising the minimum wage makes for an appealing political message, but whether it consistently leaves poor families better off is a much harder question.
It’s one Connecticut should be willing to ask.
Original Article found on Hartford Business Journal.
