Obama’s Offers False Hope to Working Class America

By EPI, Special for  USDR.

WASHINGTON – Tonight, the Employment Policies Institute (EPI) criticized paid sick leave and minimum wage mandates supported by President Obama in this evening’s State of the Union address. Empirical evidence suggests that these policies won’t only cost businesses money – they’ll cost employees their jobs.
“The President has turned Washington into ‘San Francisco on the Potomac’ tonight, as he embraces a package of mandates that was once reserved for legislators on the left coast,” said Michael Saltsman, research director at EPI. “The only ‘change’ many entry-level employees will see if the President has his way is a change in employment status.”
Research from Dr. Aaron Yelowitz of the University of Kentucky examined the impact of “compensation floors” in the city of San Francisco, where wage and benefit mandates combined to create the country’s highest wage floor. He compares the City by the Bay to similar urban areas, and finds that each one-dollar increase in the compensation floor spurs a 26-hour reduction in the number of hours worked per year by younger employees, and a two percentage point drop in labor force participation.
EPI is also providing the following research background on the proposed minimum wage and sick leave policies.
A review of ten of the most significant studies on the effects of mandatory paid sick leave finds that consequences of the policy are real while benefits are negligible:
  • In San Francisco, a survey of employers by the Institute for Women’s Policy Research found that just three percent reported a reduction in workplace illness after that city’s sick leave law passed. The vast majority reported no change. A more recent survey of Seattle employers, released by the city auditor, found a similar result.
  • The same IWPR survey found that nearly 30 percent of the lowest paid employees in San Francisco reported layoffs or reduced hours following the passage of a paid sick leave mandate. An Urban Institute survey noted that some San Francisco employers “delayed or cancelled planned wage increases” or “eliminated vacation or bonuses” in response to the mandate.
The effects of the President’s proposed minimum wage hike would be similarly detrimental:
  • An analysis of the last two decades of minimum wage research conducted by economists at the University of California-Irvine and the Federal Reserve Board found that 85 percent of the most credible studies point to job loss for less-skilled employees.
  • Research into the 28 states that raised their minimum wage between 2003 and 2007 by economists at Cornell and American universities found no associated reduction in poverty. Recently, a new National Bureau of Economic Research paper that studied the 40 percent minimum wage increase that occurred between 2007 and 2009 found that the hike actually reduced income for targeted workers compared to those in less-affected states.
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