As the debates roar on and a concrete decision looms nearer, opponents to the national minimum wage increase have spoken at length of its unintended consequences. While numerous studies have been published that advocate a raise, the loud minority have expressed their concerns as the Fair Minimum Wage Act of 2013 keeps the media buzzing.
Here are some reasons we should reconsider raising the national minimum wage:
(1) It won’t reduce poverty
Senior Policy Analyst in Labor Economics, James Sherk, published a 2007 report delineating the specific reasons why poverty is not affected by wage increases. Among them is the fact that families living close to the poverty line are less likely to see a significant change in quality of life. Drawing from an economic report:
“[t]he evidence on both family income distributions and changes in incomes experienced by families indicates that minimum wages raise the incomes of some poor families, but that their net effect is to increase the portion of families that are poor and near-poor.”
Basically, raising the minimum wage would only help a few of the more drastically impoverished and would not make drastic changes in the lives of everyone else.
The LA Times (backed by the American Enterprise Institute) further evaluated that only 11.3 percent of those receiving a raise are currently living in poverty.
(2) Wage increases lead to job loss and less working hoursSherk goes on to claim that an increase in wages will scare off employers from hiring more workers and decrease the amount of hours for existing employees in order to “even out” the raise.
Most estimates suggest that each 10 percent increase in the minimum wage reduces employment in affected groups of workers by roughly 2 percent… Thus, raising the minimum wage to $7.25 an hour would cost at least 8 percent of affected workers their jobs.
A higher minimum wage helps only those workers who actually wind up earning that wage and further disadvantages lower-income workers, who suffer fewer job opportunities and working hours. Though intended to help low-income families get ahead, the minimum wage instead costs some their jobs and others hours at work. This leaves poor families actually worse off.
The current act would raise wages about 26 percent over two years. Applying this logic, there would be an almost 5 percent dropoff of jobs by 2015.
(3) It could lead to fewer jobs for young people
Forbes reported that within six months of the last wage increase in 2009, 600,000 teens’ jobs disappeared. When the minimum wage is increased, a scarcity of jobs is imminent due to a higher cost to the employer.
With teens lacking sufficient skills and worldliness, higher paying jobs may be out of reach if no experience can come from lower paying jobs. It’s an employment catch-22. As Forbes put it, “Raising the cost of labor raises the incentive for employers to find ways to use less labor.”
With these factors in mind, it is important for voters to research and track the history of wage increases and their effects in order to make a well-informed decision. The wage increase may be a complicated, near-philosophical conundrum, but it’s one that ultimately affects us all.
Editorial note: If you missed it, here’s why we should raise the national minimum wage.
Join the discussion Please be relevant and respectful.
Minimum wage should be abolished.
It is not right to threaten people with violence who want to offer jobs even if the wages are low. The minimum wage reduces the number of jobs available. It hurts the unskilled, the poor, and the young most because they can not get entry level jobs.
All this doom and gloom about the tragic, fatal flaws to raising wages to a living level are suppositions, opinions and flat-out guesses by people with a vested interest in maintaining the status quo, and keeping labor costs low.
There is absolutely NO factual data to support any of their conclusions. Here’s factual data; Doubling the wages paid to McDonalds workers would raise the price of a Big Mac by about 65 cents. Will that break anyone? I doubt it.
Businesses will not fire employees or stop hiring. A business, to make a profit, must have employees. Why would a business owner cut odd his nose to spite his face? In manufacturing, you can reduce the number of employees somewhat my mechanizing - installing robots, etc. But, there is a limit to that. And, in the service industries, which comprise the bulk of the low-wage jobs in the USA, it is virtually impossible to replace the workers with machines. The owners are stuck. Pay higher wages to human employees and make lower profits, or fire the employees, go out of business and make no profit. Any owner with half a brain will choose to pay the higher wages.
IF the comment above is correct...then there should be full employment NOW....so where are the jobs ?????
Of course, the elephant in the room is this: You're also raising the overall cost of living so, we're right back in the same leaky boat.
I hope they raise it. The faster and higher they raise it, the quicker businesses will automate and use robots, and I won't won't have to deal with these morons. All these idiots steal jobs from kids who are joining the workforce.
Yes, minimum wage should be a living wage if you work 40 hrs a week. My pessimism stems from destructive wage difference between corporate and labor.
A minimum wage earner should not qualify for welfare. This that takes the burden of wages away from the employer and puts it on the tax payer. And promotes in the worker dependency on the government instead of dependency on one's self (self-reliance, self-respect...). Not to mention the effect low wages have on communities (you can't afford: to pay your bills on time (fees), maintain your property, car, children (the birth rate is down), children suffer if the parent is depressed which translates into schools/education suffering which hurts the economy and the future.
No, Kevin, its not. Its not their job to assess how much someone should be paid for anything. Its Socialism, pure and simple.
In the most comprehensive study done regarding the effects of minimum wage on employment, researchers concluded that raising the minimum wage does NOT have a negative effect on low-wage employment. They compared employment data sets of states and municipalities that increased their minimum wage rates with adjacent states and municipalities that did not raise rates. They found no significant differences between the two groups. "The economic growth in the 17 states that (as of 2005) had a minimum wage level above the federal level was roughly the same as in the other states." http://newscenter.berkeley.edu/2010/12/01/minimumwagejobs/
Why are these "experts" citing ESTIMATES? Minimum wage was increased in 2009; plenty of data are available. The same "experts" claimed fast food prices would skyrockets, but all of the major fast food brands actually LOWERED their prices in 2009. Additionally, there were just as many workers in those restaurants as there had been prior to that minimum wage increase. Sorry, but I'll take what actually happened in 2009 over some so-called "expert" opinions.
The OP does cause a minor increase in unemployment but also a larger increase in the disposable income.
G Boyd, when half making MW are under 25, that is a 9 year spread from 16-25. The other half is 25-65, a 40 year spread.
Where the hell did my first post go: "Less working hours for the same weekly pay!? Oh no! Gimme a brake! Look I'm a registered Libertarian but in this country (US) and corporate climate I fail to see how you can argue inflation as a tax (and a regressive tax on the lower classes) *and* against raising the minimum wage, in any practical sense. I understand the principled argument against both concurrently, but that's not reality." *?*
All things so considered, it's not perfect but it still comes out as the greatest good to the greatest number.
Denny, there's none so blind as not seeing your illogic (it is pretty much transparent so that won't be many people, so don't worry). David, not all the "little businesses" just pay minimum wage. But I definitely agree that, if we were to attain price stability, we could dispense with these debates about raising minimum wage.
The reason there is unemployment is that there is very low demand for all but absolutely necessary items ... The reason for the low demand is people do not have enough 'free cash flow' after buying necessities to increase the demand ... The reason for this lack of 'free cash flow' is taxes are too high, the value of the dollar is dramatically lower than 30 years ago due to massive money creation by the Federal Reserve for no reason other than to make it possible for Wall Street people to make big money and steal it from everyone else and of course the minimum wage after taxes and necessities is NEGATIVE. There are many ways to keep people in slavery ... having a negative minimum wage is just one of many.
If taxation is theft, than inflation is something much more egregious, and stagnant wages (which believe it or not are supported by federal policy) despite inflation compounded by cost of living increase is immoral and counterproductive to say the least.
Prices continually increase with or without wage increases. Workers need food and shelter too. Not raising the wage is bad for business and workers.
Less working hours for the same weekly pay!? Oh no! Gimme a brake! Look I'm a registered Libertarian but in this country (US) and corporate climate I fail to see how you can argue inflation as a tax (and a regressive tax on the lower classes) *and* against raising the minimum wage... argue those points together in any practical sense. I understand the principled argument against both concurrently, but that's not reality.
How about this? We should pay people 50 cents a day to really jump start the economy. Suddenly everyone can get jobs! We should then shame the low-income people for going on government welfare. Those no good 50 cents a day should be grateful for having a job; not stealing tax payers money! They also think they should suddenly be paid livable wages? I don't think so. No one has the right for a livable wage. This is the animal kingdom folks. You're either the hunter or the food. The 98% of the people is the food for the business and government's well-being and prosperity. If you the people, of the lowly food chain, achieve livable wages; everything will be ruined! Business and the government will crash into oblivion and the food source will parish along with it. I say it's high time you people get paid less and less and eat bugs and live in cardboard boxes. Be grateful for the lives you have and stop being greedy! /satire
With so many people out of work. The job I see some people doing in fast food restaurants they don't deserve the wage they are paid now. How about pay for performance? Or hire someone else and give them a chance. I wonder what Chic-Fil-A pays their employees . Never see their employees giving anything but top service.
Raising the minimum wage will only make unemployment go up. It isn't rocket science here. You make small entrepreneurs think twice about starting a business. Pay someone $10.00 an hour to flip burgers, come on.
So many barking up the wrong tree, you need cut govt spending so that dollar quits dropping in value. (say, audit the fed and end the "war on terror). You need to pressure politicians and businesses to keep good jobs here and not export them. You need to buy American when you can, and as a nation we need to export, those are the only things... raising minimum wage won't make a difference, beyond a (very) temporary raising in their standard of living. I've got two college degrees, and right now am only making 11.00/hr working in customer service and privtatized social services. There's very few good jobs, and killing all the little businesses so that minimum wage labor makes more money for a few months is not worth it. Seriously tackle the 100%+ inflation that we have every 20 years or so would do a whole lot more.
If the minimum wage is better than being on welfare, that encourages folks to get a job and get off welfare unless you are a third fourth whatever generation freeloader.
A person who works 40 hours a week should make enough to eat and have a roof over their head. Whether that means raising minimum wage or not, it really depends on the place. Where I live, it's quite easy to make ends meet on minimum wage, especially if you don't have kids. However, I realize this is NOT the case everywhere.
Some of them worked their whole life at really good jobs and never got paid that much, never able to save any, and their gas cost the same as yours, but they're grown, and can't start all over now. . .
Did you read your link? "Although workers under age 25 represented only about one-fifth of hourly-paid workers, they made up about half of those paid the Federal minimum wage or less." That means that the other half of the minimum wage earners are OVER 25. Of the half under 25, a very significant number are 18-25, therefore the majority are older than highschoolers.
Once upon a time, fast food and retail were the entry points for teenagers into the workforce. That is no longer true. Those jobs are now often primary incomes for families. I have to question the validity of the statistics because a higher minimum wage produces greater disposable income. Besides, the minimum wage has not kept up with inflation for the past 20+ years. $10/hour now is only $18,200 gross pay. (Remember, employers don't pay for the hour lunch anymore. 35 hours/week is full time) That's a poverty scale no matter how you look at it and is only worse two years later. I think it was determined that if the minimum wage had kept up with inflation it would be about $21. It would be extremely affordable if executive compensation had not exploded over the same period. I would say the insane executive compensation has been a greater hindrance. Worker salaries are recirculated in the greater economy. Executive compensation tends to be taken out and into high finance and investment.
No. The vast majority of workers are better off with a higher minimum wage plus the overall economy is stronger leading to additional job creation.
Yep. The answer is balance. We need proper Socialism, Communism, and Capitalism all balanced under one dynamic system that meets the needs, and freedom for all life. Simple.
The arguments that the article makes are short-sighted and incomplete. It doesn't seem to be taking the secondary and tertiary effects into account. Employers will hire employees as much as necessary (and no more!) to keep up with consumer demand. Increasing the amount of money that the majority of people have to spend would dramatically increase the consumer demand. Therefore it would INCREASE the number of jobs. Also, an increase in minimum wage would result in an increase in pay for the jobs that want a more skilled employee, in order to be competitive (otherwise the employees could go to the easier jobs and still make the same money), so it would take some time but eventually everyone would be making more money, and that would increase consumer spending even more and create even more jobs. Some of the overpaid corporate officers might not make more money, but some would if their business profited from the increased consumer spending.
In 1970 according to DOL Statistics 15% of workers were earning Minimum Wage, in 2009 less than 3% were earning Minimum Wage. Minimum wage has always been less that gov't Poverty Level for a family of four, from 90% of poverty level in 1968 to the current 60% and never was intended to raise a family above the poverty level if only one family member was working. That is directly from DOL!
it shouldnt be national. it should be a local minimum wage based on the cost of living in that area.
No, the median age is around 24-25 and the majority are teenagers. I looked it up a while ago. http://www.bls.gov/cps/minwage2011.htm
An opinion is a point of view,if you didn't know,and you need to read the Lewis Powell Manifesto to understand why the government doesn't want to equalize everybody.Free enterprise is what is controlling the government and they don't want a realistic living wage.
The minimum wage act should be repealed totally. It is not the government's job to tell me how much I can afford to pay my employees. Stop the insanity people!
Agreed, Kevin. This argument has been used since the implementation of a minimum wage. not valid then and not valid now.
Regardless of what it was intended for, the reality is that many people count on these jobs for a living, so they need to be able to make enough money to live. They are certainly putting in their time and effort, and they should be compensated accordingly.