How many times has that idea been touted?
Ever wonder why those who oppose increasing the federal minimum wage can't seem to make a dent in the argument that the federal minimum wage should be raised and it keeps getting raised incrementally, just like the federal debt ceiling?
The answer is relatively straightforward: Research indicates there are few, major negative effects associated with increasing the federal minimum wage.
So, why not just increase the federal minimum wage, not to $10.10 as the President did yesterday by fiat (otherwise known as an "executive order") but to $20/hour...$50/hour...or even $100/hour?
According to the former chief economist of the U.S. Department of Labor, Diana Furchtgott-Roth, the answer to that question is also relatively straightforward.
There are negative effects. Researchers aren't measuring them.
Today, 97% of American workers earn more than the minimum wage. This is due not to the fact that employers must pay at least the minimum wage. No, employers have to pay more than the federal minimum wage--in the form of total compensation--if they are going to retain quality workers. That is one reason why research hasn't measured the major negative impacts of minimum-wage increases. That is, those increases impact only 3% of American workers, not the 97% who earn far in excess of the federal minimum wage.
So, who are those 3%?
- Today, 50% of minimum-wage workers (1.5% of American workers) are under age 25 and 24% are teenagers.
- The nation's unemployment rate currently is 7.3%. But, unemployment among youth (ages 15 to 24) is 12%, teenage unemployment is 21%, and African-American teen unemployment is 36%.
- In 2012, ~1.8M Americans aged 16 to 24 worked for minimum wage, while many more coveted those jobs.
Increases to the minimum wage oftentimes are characterized in terms of "justice" and "equity" so that no worker would earn less than "average." Taken at face value, what's that rhetoric sound like?
The President's solution displaces workers, especially young Americans many of whom start successful careers with minimum-wage jobs never expecting that job to become a lifetime career. How so? Furchgott-Roth notes that when the minimum wage is raised, employers hire higher-skilled workers or switch to different forms of technology (e.g., placing orders through touchscreens) to cap wages paid. For example, when the minimum wage is raised, employers hire higher-skilled workers or switch to different forms of technology (e.g., placing orders through touchscreens).
Raising the federal minimum wage is not cost free, as President Obama suggested once again last evening. The number of low-skill Americans who are unemployed rises and people spend less of their disposable income on higher-priced good and services.
"Supersizing a wage is not as simple as supersizing a hamburger," Furchgott-Roth notes.
Let the discussion begin...
To read Diana Furchtgott-Roth's article in MarketWatch, click on the following link:
"The Real Cost of Raising the Minimum Wage."