Pa. minimum wage increase could leave students jobless

Some Pitt students may get a pay increase this summer while others might find themselves… Some Pitt students may get a pay increase this summer while others might find themselves without a job, according to a Pitt business professor.

These changes will come in the wake of Pennsylvania’s scheduled minimum wage increase, Joseph Craft, a professor in the Joseph M. Katz Graduate School of Business, said.

Although the increase will benefit most workers, Craft predicted that some employers might try to cut costs by using more advanced technology in an effort to reduce labor needs. In this process of substituting automation for labor, employers might replace young, unskilled or inexperienced workers with people who have more experience with this technology.

More than nine years ago, on Sept. 1, 1997, the United States’ federal minimum wage increased from $4.75, the minimum wage in 1996, to $5.15 an hour. Nationally, not much has changed since then.

Today, employees across the country who earn the federal minimum wage still work for only $5.15 an hour, which, adjusted for inflation, is the lowest value of the minimum wage since 1955, according to a report issued by the Economic Policy Institute.

But Pennsylvania’s legislature, along with legislators in many other states, is working to change this.

On Jan. 1, the lowest-paid workers in Pennsylvania got a raise to $6.25 an hour, a $1.10 pay increase from last year’s minimum wage. The bill mandating the state wage increase, SB 1090, requires an additional pay hike in July so that by July 1, Pennsylvania’s minimum wage will be $7.15. Although the bill allows businesses with fewer than 10 employees to make the wage increases more gradually, all businesses must make the change by the July deadline.

A similar bill, currently being reworked and awaiting a vote in the U.S. Senate, would raise the federal minimum wage to $7.25.

Heated debates have arisen across the state and the nation over the impact of the proposed minimum wage increases, and some Pitt professors are weighing in on the issue.

Opponents of the wage increase argue that it will have a negative effect on employment because employers won’t be able to hire as many people if they are paying their employees more.

But Craft disagrees.

Based on experience and some empirical work, Craft said it is unlikely that the minimum wage increase to $7.25 will have any serious negative employment impact.

Women, African-Americans and Hispanics, on average the lowest-paid workers in the labor market, are most likely to benefit from the wage increase, he said, adding that, although a few young employees might suffer from the new legislation, others will benefit.

Employees who currently earn just above the minimum wage are likely to receive a pay raise in the coming months, even though it is not mandated by state law, Craft predicted, in order for employers to maintain the payment differential between experienced and inexperienced workers.

Another common argument against the state minimum wage increase is that it will put Pennsylvania’s businesses at a competitive disadvantage to businesses in other states, where employers can legally pay lower wages. But Christopher Briem, regional economist at the University Center for Social and Urban Research, said the increase would have a minimal effect on interstate competition because most of the industries affected operate only within Pennsylvania.

Despite these potential negative effects, Susan Hansen, a professor of political science in Pitt’s School of Arts and Sciences, said the wage increase would probably have a positive impact overall.

For instance, because people will be making more, they will spend more and save more, which boosts the economy, Hansen said, adding that people who earn more money are less likely to be homeless and have less need for welfare and subsidized housing.

The minimum wage increase will be particularly beneficial to Pittsburgh residents, according to Ralph Bangs, the associate director of the Center on Race and Social Problems, because, while the cost of living in Pittsburgh meets the national average, full- and part-time wages are lower here than in the rest of the nation.

Although all of these professors would agree that the higher minimum wage is a step in the right direction, Angela Williams Foster, a professor of Public and Urban Affairs in Pitt’s Graduate School of Public and International Affairs, said that the increase is not enough.

In order to afford a two-bedroom apartment in Pittsburgh, the renters must earn about $14.50 an hour, which, under the new minimum wage, would still require two owners to work full time and would be virtually impossible for a single parent with children.

Although the wage increase is a start, Foster said, it is still not a living wage or a wage that enables the worker to afford typical living expenses.