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Study: Wage hike would cut jobs

Report criticizes Bay State plan to raise minimum

A study released yesterday by the Beacon Hill Institute at Suffolk University says a proposal to increase the state's $6.75 hourly minimum wage to $8.25 by 2007 would result in the loss of almost 27,000 jobs.

The study, partly financed by the Retailers Association of Massachusetts, which opposes the increase, also found that increasing the minimum wage could force some businesses to leave the state. A hearing on the proposed legislation is scheduled for tomorrow before the Joint Labor and Workforce Development Committee.

''If you increase the cost of labor in this case, employers will use less of it. This is standard economic theory," said David G. Tuerck, the study's coauthor and executive director of the institute. ''Nobody believes that you can indefinitely raise the minimum wage rate without seeing a reduction in employment."

One of the bill's sponsors, Representative James Marzilli Jr., dismissed the institute's findings. ''Every time the Legislature comes into session, they predict that the sky is falling," the Arlington Democrat said. ''If unemployment insurance goes up, they predict that jobs will be lost."

The bill, cosponsored by Senator Marc Pacheco, a Taunton Democrat, would also tie future minimum hourly wage increases to the rate of inflation. If the measure becomes law, it would be put into effect in two stages over two years. Massachusetts is among 14 states whose hourly minimum wage exceeds the federal minimum of $5.15 per hour.

The Beacon Hill Institute study found that ''low-wage workers, women workers, and workers 20 years old and older" would be most likely to lose work in the event of a wage increase.

The study said that even without the proposed increase, Massachusetts employers are at a competitive disadvantage -- for example, the state's current minimum wage is 31 percent greater than New Hampshire's $5.15 minimum.

About 261,000 low-wage Massachusetts workers could be affected by changes in the minimum wage law, according to the Massachusetts Budget and Policy Center.

Some economists say the proposed legislation would not have a serious impact on unemployment. ''It should have a small impact on employment, and a substantial improvement on wages," said Lawrence Katz, the Elisabeth Allison Professor of Economics at Harvard University.

Katz and Karl Case, an economics professor at Wellesley College, are among 50 Massachusetts economists who recently signed a statement in favor of the increase. In its research, the Beacon Hill Institute referred to information in a textbook written by Case that included an examination of minimum wage increases on unemployment and seemed to support the study's premise.

But Case said his book provided a variety of viewpoints. ''I signed the petition and I am in favor of increasing the minimum wage," he said, ''but I understand there are trade-offs. Other studies have found little or no change. The evidence on whether it will cause job loss is mixed, but the gains to wage earners are significantly greater than what I believe the costs are likely to be."

Diane E. Lewis can be reached at

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