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Why We Should Not Raise the National Minimum Wage

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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.

(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 hours

Sherk 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.”

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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.

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