IMPACTS OF MINIMUM WAGE &amp; EDUCATION SPENDING ON STATE ECONOMY IN THE U.S.

This paper explores impacts of minimum wage & education spending on state economy in the United States.We propose two research hypotheses.States with higher minimum wages are expected to perform significantly better.States with greater spending on K-12 education are expected to perform significantly better.To measure the State economic performance, we employ the data envelopment analysis model, using three input variables (state government employee payroll, number of State government employees, state population) and two outputs (unemployment rate, & per capita income).The relative efficiency score by the DEA model serves as the State economic performance measure.Mann-Whitney test results on the 2012 economic data reveal no statistical significances on the first hypothesis (the minimum wage) while evidence supports the second hypothesis.We also discuss policy implications and practical applications.We are not aware of any DEA models addressing these four issues and their relationship to one another, and, as such, we hope our research provides new insight into these important public policy issues.Using data from the United States Census Bureau, the Bureau of Labor Statistics, the Department of Labor and gathered white papers and articles, we plan to create a model assessing minimum wages and per pupil spending for each of the 50 states plus the District of Columbia, and their potential effects on each state's unemployment rate and their per capita income.The next section contains a brief review of prior studies related to our analysis.In the third section, we provide the methodology followed by the statistical results from the DEA models in the fourth section.The fifth section discusses those results.We put our conclusions in the last section of this paper. REVIEW OF PRIOR STUDIES Minimum WagePolicymakers, experts and people in general have been arguing about the effects of minimum wage hikes since the Fair Labor Standards Act of 1938 went into effect some 77 years ago.On June 24, 1938, just prior to signing the FLSA into law, President Franklin Roosevelt stated in one of his "fireside chats:" "Do not let any calamity-howling executive with an income of $1,000 a day, ...tell you...that a wage of $11 a week is going to have a disastrous effect on all American industry" (Roosevelt, 1938).While there have been countless studies related to what effect, if any, each increase in the minimum wage will have on industry, few, if any, studies have attempted to prove a correlation between higher minimum wages and lower unemployment/higher per capita income.This quote from President Roosevelt upon the creation of a federal minimum wage raises an important issue which affects the study of criteria such as minimum wage and per pupil spending.These are high politicized issues.Many of the arguments made for or against increases in these variables are done so in the context of political arguments and there is considerable money and effort spent by private interests in trying to prove or disprove a correlation between things like increases in minimum wage and benefits to society.Our analysis will hopefully provide some useful information from a disinterested perspective.Early on, almost all of the studies focused primarily on the federal minimum wage and what effect it would have on the national economy, but such an analysis today would almost be irrelevant considering the fact that most larger population states have laws that set minimum wages in excess of the federal minimum wage.Gitis (2014) conducted a study looking at the effects of minimum wage on unemployment rates and job creation.He performed an analysis of states' minimum wages and its effects on states' unemployment rates and job creation.He looked at