EDITORIAL: The unintended consequences of raising the minimum wage
The minimum wage debate is “on” again after President Obama called for raising it from the current $7.25 per hour to $9, this time in his recent State of the Union address.
The president and Congress are also calling for the creation of more jobs. What we haven’t heard, though, is discussion about how job growth and the minimum wage are connected.
When someone mentions "minimum wage,” it often triggers a knee-jerk reaction. It should trigger a sound assessment of its impact upon jobs and the overall economy. Many politicians would have us believe there are hordes of people supporting their families on the minimum wage, and that increasing it would boost the economy.
Although some workers are trying to support families on just a little more than seven bucks an hour, data show they’re relatively few in number.
A report released last month by the Heritage Foundation shows what similar studies have indicated in the past: minimum wage increases actually harm many of the workers proponents claim they want to help. Only 2.9 percent of the United States workforce is working for the federal minimum wage, meaning that 97 percent of U.S. workers make more than the minimum wage. A close look also reveals that more than half of those drawing the minimum wage are between 16 and 24 years of age. These young people tend to work part-time, and many are attending school. So a boost in the minimum wage would raise the income for suburban high school and college students — but not necessarily those trying to support a family.
The average family income of minimum-wage workers is more than $53,000 per year. Obviously, the minimum-wage earner is not the primary provider in the family. Older workers (those above age 24) earning the minimum wage have an average household income of $42,500 a year, far above the poverty line of $22,500. A majority of these choose to work part-time and a great many are married. These older minimum-wage earners simply do not appear to be living on the edge of the poverty cliff.
The Heritage Foundation report also points out that the oft-mentioned “working poor” are fewer in number than some politicians would have you believe. The report suggests that most of the poorest people in the U.S. don’t work at all. It is difficult to understand how increasing the minimum wage, which is designed for entry-level workers, is going to help this group find jobs.
State minimum wage rates, where they exist, are controlled by legislative action in the individual states. The federal minimum wage law supersedes the state law where the federal rate is higher than the state’s. If the state’s rate is higher, that rate applies.
According to the U.S. Department of Labor, four states have set the minimum wage below the federal rate. There are 19 states, plus the District of Columbia, which have rates higher than the federal level. Twenty-two states, including North Carolina, have a rate which matches the federal level. The remaining states have not established a minimum wage rate. (At $9.19 per hour, the state of Washington has the highest rate; Georgia and Wyoming have the lowest rate at $5.15 per hour.) Ten states have a minimum wage linked to the consumer price index. Normally, these rates are adjusted each year.
Lawmakers at all levels of government continued to say job creation is a primary goal. The jarring truth is that a higher minimum wage makes it more expensive for businesses to hire inexperienced workers. The result? Some of those still working will get more compensation, but more will lose their jobs or fail to get new ones. That won’t improve the employment picture nor reduce the poverty rate. It’s a disingenuous approach to a genuine problem.