Ohio’s minimum-wage increase for both tipped and nontipped employees, effective New Year’s Day, will boost economic growth by more than $38 million and impact 330,000 workers, according to the nonpartisan Economic Policy Institute.
A 10-cent increase will put Ohio’s minimum wage at $7.95 per hour. Tipped workers — those making more than $30 per month in tips — will see their minimum hourly wage rise 5 cents to $3.98.
Analyzing U.S. Census data, the nonpartisan Economic Policy Institute estimated that the equivalent of 300 new jobs in Ohio will result from the increased economic activity caused by higher wages.
The group expects that 178,000 workers will see their wages increase to meet the new state minimum. An additional 152,000 workers who currently make more than the new minimum wage will receive a raise, as employers adjust their pay scales upward to account for the shift, according to the report.
“Ohio workers and the Ohio economy will both benefit from this raise for our lowest-paid neighbors,” Amy Hanauer, executive director of Policy Matters Ohio, said in a statement. “The employees who benefit will turn around and spend money in our communities, stimulating growth here.”
In 2006, Ohio voters approved a ballot initiative that raised the minimum wage and provided for annual adjustments tied to the rising cost of living.
Back then, the minimum wage increased from $5.15 to $6.85 per hour. In 2013, Ohio’s minimum wage rose 15 cents to $7.85 per hour.
Ohio is one of 13 states that will raise the minimum wage Jan. 1. In total, the Economic Policy Institute projects that wage hikes will affect 2.5 million workers across the country, creating $619 million in new economic activity and 4,600 new jobs to meet growing consumer demand.
Ohio employers who gross more than $292,000 will pay employees the new hourly rate, and employers clearing less than that will pay their employees the current federal minimum of $7.25 per hour.
After President Barack Obama’s call in his 2013 State of the Union address to increase the federal minimum wage, lawmakers from both houses of Congress introduced the Fair Minimum Wage Act of 2013. The bill proposes to raise the federal minimum wage to $10.10 dollars per hour and establish the national minimum for tipped employees at 70 percent of the full minimum wage.
Opponents of raising the minimum wage have traditionally argued that the increasing wages would raise the labor cost of employers, forcing them to scale back and thus increasing unemployment levels.
One study that opponents have cited is an exhaustive 2006 paper by economists David Neumark and William Wascher in which the authors found that low-skilled workers seem to be the ones most adversely impacted by minimum wage hikes.
They go on to refute arguments that increasing the minimum wage leads to higher employment and a better economic climate.
“In contrast, we see very few — if any — cases where a study provides convincing evidence of positive employment effects of minimum wages, especially among the studies that focus on broader groups for which the competitive model predicts disemployment effects,” Nuemark and Wascher wrote in their study’s conclusion.
Meanwhile, Policy Matters Ohio points to a 2013 study by the Center for Economic and Policy Research, which reviewed 20 years of research and found that minimum-wage increases have generally not caused the job losses that opponents invoke.
Rather, the study found that “minimum wage has little or no discernible effect on the employment of low-wage workers,” because the cost shock to most employers is small, and they are able to adjust in a variety of ways.
Ohio is one of 21 states, plus the District of Columbia, that sets its minimum wage above the federal level.