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Apr 7, 201409:13 AMOpen Mic

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Raising the minimum wage will kill jobs

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Mary Burke’s support of the proposal to raise the minimum wage to $10.10 per hour might make for good politicking in her campaign for governor, but her plan would be economically devastating to thousands of Wisconsin workers.

Raising the minimum wage is a lose-lose proposition because it will result in significant Wisconsin job losses, will reduce economic opportunity for younger and lower-skilled workers, will raise consumer prices, and will not meaningfully reduce poverty or help the working poor.

A recent analysis by the Employment Policies Institute (EPI) found increasing the minimum wage to $10.10 per hour would kill as many as 27,937 jobs in Wisconsin. That estimate is consistent with a projection by the Congressional Budget Office (CBO) that predicted 500,000 lost jobs nationwide if the federal minimum wage was increased to $10.10.

So how would raising the minimum wage result in lost jobs? The answer is quite simple. 

Increasing the minimum wage will increase labor costs for employers. In turn, employers will respond by reducing their workforce, hiring fewer workers, and reducing hours of work for existing employees. That translates into job loss and fewer economic opportunities for workers.

WMC recently commissioned a scientific statewide poll to test this issue and found 53% of likely voters initially support increasing the minimum wage to $10.10 per hour. However, voters quickly abandon the proposal when told of the projected job losses. Support plummets to 39% when voters know raising the minimum wage kills jobs.

In order to understand who will be harmed most by a minimum wage increase, it is important to understand who minimum wage earners are. The data show those who stand to lose the most from a minimum wage increase are younger and lower-skilled workers.

According to the U.S. Bureau of Labor Statistics, only 1.1% of workers over age 25 earn the minimum wage. That’s because typical minimum wage earners in America are teenagers living with their parents in middle-class families. They are not living in poverty nor are they earning a wage that is responsible for sustaining a family.

Wisconsin is no exception. According to the EPI analysis, the average household income of Wisconsin families impacted by raising the minimum wage to $10.10 per hour is $58,812. That’s actually higher than Wisconsin’s median household income of $52,627.

Clearly, the majority of minimum wage earners are not the working poor, but are instead young people entering the workforce with little experience and very few skills. They are people who desperately need entry-level jobs to begin the process of climbing the economic ladder by acquiring skills that lead to better jobs with higher wages.

Unfortunately, increasing the minimum wage places the bottom rung of the economic ladder out of reach for many of these workers by eliminating entry-level positions that help workers gain the experience needed to advance in the workforce. At a time when employers are already struggling to find skilled employees, the adverse impacts from a minimum wage increase could not happen at a worse time. We need more, not fewer, workers in our state who are gaining those entry-level “soft skills” that will help employers make the decision to invest significant resources into training them for a long-term career.


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Apr 24, 2014 01:14 pm
 Posted by  Anonymous

There are a myriad of studies on both sides of the minimum wage debate. Historically when the minimum wage has increased, no one has been able to attribute significant job losses to the past wage increases.

Even given the CBO study referenced here, the other findings of the same study include:
"- Once the increases and decreases in income for all workers are taken into account, overall real income would rise by $2 billion.
-Real income would increase, on net, by $5 billion for families whose income will be below the poverty threshold under current law, boosting their average family income by about 3 percent and moving about 900,000 people, on net, above the poverty threshold (out of the roughly 45 million people who are projected to be below that threshold under current law)."

Seems there is a rather minimal, yet positive impact to raising people from poverty but an overall positive impact to getting more money into the hands of people most likely to spend it. Thus improving sales for a broad spectrum of businesses.

A couple questions for WMC:
1. If you're opposed to the wage increase, what policies DO you favor that would make for a stronger lower/middle class that has more spending power and is less dependent upon government subsidies? Just doing tax cuts for business doesn't seem to lead to economic expansion without an accompanying increase in demand.
2. How credible is the lost jobs argument anyway? This implies that businesses are employing low-wage workers today that are not really needed (employed for training purposes, etc). Most businesses I see utilizing minimum wage workers run in bare-bones mode. Though there are some that are looking to the future, their trainees are seldom making minimum wage in any case.

The min wage and earned income credits are credible ways to bolster the lower and middle class, reducing somewhat dependency on SNAP, ACA subsidies and other government payments. Obviously these are just a part of a bigger Picture. Bob

Apr 24, 2014 01:56 pm
 Posted by  Anonymous

I'm always fascinated by the "myriad" of studies that indicate no connection between higher minimum wages and loss of jobs. I opine that these studies are made outside the real-world environment, because anyone who runs a business understands immediately the link.
A few facts that are seldom brought into evidence. First, the raise in minimum wage affects many more than below minimum-wage people. The worker who makes ten dollars today will not be satisfied for $10.10 when the minimum hits that point. There will be a ratcheting up of pay across the board, with the exception of rates are so high above minimum as to be unaffected (maybe double...maybe higher). Great, you say? Consider that the worker is in competition with offshore sources, and more importantly, technology. When my total payroll goes up by twenty per cent, that piece of robotics becomes much more attractive as a replacement (that doesn't require health insurance, get sick, go on vacation, etc. etc.) Business owners run businesses to make money, not to provide jobs. Those jobs that are profit-makers at today's rate are not continued when there is a cost-effective alternative.
Sorry that we business-owners are such bastards, but that's the free enterprise system. We can solve all of this by adopting Communism. That's been proven to work, right?
As for training wages, that's only a ninety day window. Perhaps we should take a page from the Brits, who have a two-tier minimum wage, lower than ours for teenagers, and higher than ours for adults.
Last thought...when I started in the workforce, minimum wage was $1.00, and a good annual wage was $5000/year(and this place was all cornfield). My view is that the rise in minimum pay has not only reduced the number of workers, but has contributed to inflation, signifying nothing.
(I'd tell you how to solve the other problems, but you don't want to hear my suggestions, and besides, I'm out of remaining characters.)

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