Minimum Wage Hike Has Mixed Effects

Mar 25, 2014

A new analysis from UConn claims that Connecticut may suffer some real economic pain from the minimum wage increase that went into effect this year.

The state's bar and restaurant industry will be hit, and teenagers will suffer in terms of lost employment.

An article in the latest edition of The Connecticut Economy, UConn's quarterly economic digest, reviewed recent research on the effects of raising the minimum wage. It said the raise that took effect in the state in January to $8.70 an hour will reduce the number of people living in poverty by about 1.6 percent.

It also said that because the state now has the fourth-highest minimum in the country, and because its unemployment remains above the national average, it could see some negative effects. The article suggested the state's bar and restaurant industry will be hit the hardest, and that teenagers will suffer most in terms of lost employment.

It said consumers should be prepared for higher prices, although it said all of these effects will dissipate as labor market conditions improve.

Among the more unexpected effects, the report said data shows a correlation between minimum wage increases and alcohol-related driving accidents involving teens, presumably because they have more discretionary income.

Connecticut's minimum wage is slated to rise again in January of next year to $9.00 an hour. The governor has proposed that it should be at $10.10 by 2017. That bill will be voted on Wednesday by the General Assembly.