As Rhode Island Raises Minimum Wage To $9, Worry About Economy

Rhode Island the highest unemployment rates in the U.S. Now, it has a $9 minimum wage, up $1 and well above the national floor of $7.25.  More than any other state, the move may provide proof of the effects of the minimum wage on a regional economy.

The jobless rate in Rhode Island in May was 8.2% according to the BLS, stubbornly above the national 6.3% that month. The state has lost much of its old and inefficient manufacturing base, and financial institutions which used to have large operations there. Rhode Island has not been able to replace many of those positions because no other industries have replaced these two.

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If the unemployment characteristics of Rhode Island are like the rest of the country, it has most trouble with the young and under-education. Fortunately, Rhode Island does not suffer the blight of poverty that many southern states do. However, median household income averaged over three years by the U.S. Census puts the state in 27th place at $53,495. The state in neither rich nor poor. People who do work have nowhere near the median of over $70,000 in the most well-off states by that measure.

Rhode Island also faces the potential disadvantage that among its largest employers are the state and federal governments. If the move toward government austerity continues, it will be hard to create jobs lost in these sectors.

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In theory, the states most able to absorb higher minimum wages without hurting consumer spending, and potential layoffs are those with high median income and low jobless figures. Rhode Island is neither of these, which means a raise in minimum wage may be harder for its economy to absorb,