Raising the minimum wage will kill jobs
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.
Those who advocate a minimum wage increase as a means to reduce poverty are on the wrong side of history. Increasing the minimum wage has proven to be an ineffective policy in terms of reducing poverty. The U.S. Census Bureau recently released a report that found 59.7% of working-age people in poverty do not work. It is difficult to imagine how increasing the minimum wage will help lift people out of poverty when roughly 60% of those in poverty aren’t even working in the first place.
The empirical evidence also suggests raising the minimum wage simply does not impact poverty levels. Between 2003 and 2007, a total of 28 states increased their minimum wage beyond the level of the federal minimum wage. A study done in 2010 by Joseph Sabia and Richard Burkhauser that was focused on the minimum wage and poverty found no evidence the minimum wage lowered poverty rates in any of those 28 states.
Increasing the minimum wage is a poorly conceived economic policy that would cost Wisconsin thousands of jobs. It misplaces focus on the small sliver of the workforce (2.5%) who earn the minimum wage, while simultaneously making it harder for entry-level workers to get ahead.
Politicians should instead focus on how we can improve our state’s business climate to attract and retain high-wage jobs like those in our manufacturing sector.
Scott Manley is the vice president of government relations for Wisconsin Manufacturers & Commerce. You can follow him on Twitter @ManleyWM.
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