From Minimum Wage to the Welfare Roles

By | April 20, 2017

This photo from the Great Depression shows that many able and qualified men couldn't even get a job if they wanted to. The sign lets them know that no jobs are available there.:

Washington D.C passed the Fair Shot Minimum Wage Amendment Act of 2016 last June. The Act increases the minimum wage to $12.50 per hour in July and will scale to $15.00 per hour in 2020. After that it will increase with the area CPI as published by the Bureau of Labor Statistics (BLS).

The D.C. government with the assistance of the American University in D.C. conducted a study to determine the Act’s impact on employment in the district. The short answer from the study is this:

We predict that over 60,000 District residents will be impacted by this policy; residents will observe an average increase of about 20% in wage income, while about 3.4% of District resident workers will experience job loss. We also find that the city’s affected EITC recipients will lose a total of $16.4 million in federal and local EITC payments in 2021 while gaining $56.6 million in additional wages by way of the $15 minimum wage.

Let’s put this in context. The BLS estimates that DC has about 396,800 people in the civilian workforce. The current number of unemployed persons is about 22,700, or about 5.7%. An increase in unemployment of 3.4% would net an additional 13,500 unemployed, increasing the unemployment rate to 9.1%. Since this addition to the unemployment roles will affect those already on the socioeconomic margins, the effect of this policy will be to push more people into a poverty situation.