Arizona minimum wage increase put developmentally disabled out of work

Arizona's recent increase in the minimum wage to $6.75/hour put a bunch of developmentally disabled people out of work. The result--now the state Industrial Commission is proposing to call these people "trainees" and exempt them from the minimum wage so that they can go back to work.

(Via Creative Destruction.)

Arizona minimum wage increase leads to job cuts and reduced hours

In November, Arizonans voted to increase the state minimum wage from $5.15/hour to $6.75/hour, and there is now some anecdotal evidence of job loss for teen workers in South and Central Phoenix.

Pepi's Pizza in South Phoenix is laying off three of its 25 workers and Mary Coyle's Ice Cream Parlor has cut back on hours and not replaced two workers who quit (despite the fact that its owner, Tom Kelly, voted for the increase). Kelly notes that he also increased the wages of those who were already making above minimum wage, with the net effect being an additional $2,000/month in expenses.

The Arizona Republic article notes that the majority of the state's 124,067 workers aged 16-19 already made well above minimum wage before the change, 30.1% of workers making minimum wage fall in that age range, and 30.4% of minimum wage workers live with a parent or parents.

Minimum wage increase: how to make the poor poorer

Rather than increase the Earned Income Tax Credit or reduce payroll taxes, Congress is moving forward with an increase in the minimum wage. Gary Becker and Richard Posner have written a Wall Street Journal op-ed titled "How To Make the Poor Poorer" which describes the likely consequences of this feel-good legislation:

Although some workers benefit -- those who were paid the old minimum wage but are worth the new one to the employers -- others are pushed into unemployment, the underground economy or crime:

• The losers are therefore likely to lose more than the gainers gain; they are also likely to be poorer people.
• And poor families are disproportionately hurt by the rise in the price of fast foods and other goods produced with low-skilled labor because these families spend a relatively large fraction of their incomes on such goods.

Because most increases in the minimum wage have been slight, their effects are difficult to disentangle from other factors that affect employment:

• But a 40 percent increase would be too large to have no employment effect; about a tenth of the work force makes less than $7.25 an hour.
• Even defenders of minimum-wage laws must believe that beyond some point a higher minimum would cause unemployment, otherwise why don't they propose $10, or $15, or an even higher figure?

Good intentions don't make for good legislation.

UPDATE (February 9, 2007): Glen Whitman writes about how the minimum wage debate is largely symbolic on both sides, though this time it could be different.

UPDATE (September 6, 2007): I just came across this interesting post at the Coyote Blog about how minimum wage changes affect his specific business.

UPDATE (October 10, 2007): Here's a nice summary of U.S. minimum wage worker statistics, including:

According to the U.S. Department of Labor, the median annual income of a U.S. worker is $32,140. Federal minimum wage is currently $5.85 an hour, or about $11,500 per year — just above the poverty line. Of the 76.5 million people paid by the hour in the United States in 2006, 2.2% make minimum wage or less. Here are some generalizations we can make about minimum wage workers:

• Most minimum wage earners are young. While 2.2% of all hourly workers earn minimum wage or less, just 1.4% of workers over the age of 25 are paid at or below the Federal minimum wage. More than half (51.2%) of minimum wage workers are between 16 and 24 years old. Another 21.2% are between 25 and 34.
• Most minimum wage earners work in food service. Nearly two-thirds of those paid minimum wage (or less) are food service workers. Many of these people receive supplemental income in the form of tips, which the government does not track.
• Most minimum wage earners never attended college. Just 1.2% of college graduates are paid the minimum wage. If you only have a high school degree, you’re more likely (1.9%) to be paid minimum wage. Those without a high school degree are nearly three times as likely (3.7%) to earn minimum wage. 59.8% of all minimum wage workers have no advanced education.
• Finally, as you might expect, part-time workers are five times more likely to be paid the minimum wage than full-time workers.

UPDATE (November 25, 2012): There has been an accumulation of evidence that a moderate minimum wage is a net benefit, improving both wages and employment in some cases (reference to The Economist, Nov. 24, 2012, p. 82, "Free exchange: The argument in the floor").

Arizona election results

The good news: Arizona did not elect aspiring theocrat Len Munsil (who was soundly defeated by incumbent Governor Janet Napolitano), got rid of corrupt Congressman J.D. Hayworth (replacing him with former Tempe Mayor Harry Mitchell), narrowly voted down an amendment to the state Constitution to ban gay marriage and anything "similar to" it, and voted in favor of greater protections against eminent domain abuse.

The bad news: Arizona re-elected Sen. Jon Kyl and Rep. Rick Renzi, approved the creation of a new bureaucracy to continually raise the minimum wage (the main effect of which is to reduce teen employment; it has negligible positive effects for low wage earners, versus something that would genuinely be effective like reducing payroll taxes), passed the worse of the two anti-smoking measures, banned probation for methamphetamine abuse offenses, and passed all of the anti-illegal immigration measures (declaring English the official language, prohibiting illegal immigrants from posting bail or being awarded certain kinds of damages in court, and limiting educational services to illegal immigrants).

Teenager Jarrett Maupin (Al Sharpton, Jr.) was elected to the Phoenix Union High School District Board in Ward 2. Maupin, who was a member of the Republican club at Brophy College Prep before switching schools to St. Mary's and becoming a Democrat and protege of Sharpton, charged that Brophy students demonstrated their racism by referring to "blackboards."