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Press Release

    Beacon Hill Institute: Increased minimum wage would destroy jobs, reduce state's competitiveness

    06/15/2005

    The BHI study is available at http://www.beaconhill.org/BHIStudies/H3782MinWage62005.pdf

    BOSTON - A study released by The Beacon Hill Institute at Suffolk University shows that a proposed increase in the state minimum wage would lead to the destruction of 26,970 jobs, the preponderance of which would be among low wage workers, women workers and workers 20 and older. It would also raise consumer prices and, in doing so, reduce the ability of state businesses, particularly businesses located near the New Hampshire border, to attract customers.

    The proposed increase is contained in a bill sponsored by state Representative J. James Marzilli. The bill would increase the Massachusetts minimum wage in two stages, from $6.75 per hour to $8.25 per hour. The bill would also index the minimum wage to consumer prices and provide for a commission to consider further increases in the minimum wage to "reflect existing economic conditions in the Commonwealth."

    The increase would benefit workers who are able to keep their jobs. The wages of those who would be paid at the new minimum wage would rise by $405 million. But those additional wages would be largely offset by $371 million in wages lost by the workers who, as a result of the higher minimum wage, ended up unemployed.

    The study points out that high Massachusetts labor costs are already taking their toll on state competitiveness. At $6.75 per hour, the existing Massachusetts minimum wage is 31% greater than the New Hampshire minimum wage of $5.15 per hour. Under the time-and-a-half requirement of the state "blue laws," the Massachusetts rate increases to $10.13 on Sundays, almost double the New Hampshire rate.

    "This shows why, in recent years, Massachusetts has lagged behind New Hampshire in both the hospitality and leisure sector and the retail sector," says David G. Tuerck, Executive Director of the Institute and a co-author of the study.

    He adds, "Once the increase in the minimum wage sought by Representative Marzilli is fully implemented, the lowest Massachusetts wage rate will be 60% greater than the lowest New Hampshire wage rate on weekdays and 140% greater on Sundays. What is left of the retail sector in places like Lawrence, Lowell and Haverhill will complete their migration to low-wage and sales-tax-free places like Salem, New Hampshire."

    The study is available online at http://www.beaconhill.org. The study received partial support from the Retailers Association of Massachusetts. The Beacon Hill Institute is solely responsible for its content.