Saturday, April 26, 2014

Increasing the minimum wage

Will increasing the minimum wage produce disastrous job losses? NO! Experts have debunk that claim time and time again. Nonetheless, opponents made the same prediction each time the minimum wage was increased. The fact that these predictions have never come true doesn’t keep them from rolling off the tongues of low-wage advocates.

In February, the non-partisan Congressional Budget Office (CBO) reported on the impact of proposed increases in the minimum wage to $9 per hour. Increasing the wage to $9 per hour, according to the CBO, would result in job losses of less than one-tenth-of-one-percent.

The CBO continued, “Federal spending and taxes would also be indirectly affected by the increases in real income for some people and the reduction in real income for others. As a group, workers with increased earnings would pay more in taxes and receive less in federal benefits of certain types than they would have otherwise.”

When Americans pay their taxes, the bill includes billions for maintaining a publicly funded safety net for low-wage-workers. Most people receiving so-called “welfare” benefits are working full-time but are paid so little they qualify for food stamps and Medicaid. For example, Forbes says, “Walmart’s low-wage workers cost U.S. taxpayers an estimated $6.2 billion in public assistance including food stamps, Medicaid and subsidized housing.”

Walmart isn’t alone.

Prices may rise minimally to cover minimum wage increases. That impact will be offset by the reduction in costs of federal programs. The CBO predicts the overall effects would include a small decrease in the budget deficit for several years. They acknowledge there may be a small increase after that unless economic growth overcomes that trend.

The Economic Policy Institute believes minimum wage hikes would do that.Raising the minimum wage,” their 2013 study found, “would help reverse the ongoing erosion of wages that has contributed significantly to growing income inequality. Additionally, it would provide a modest stimulus to the entire economy, as increased wages would lead to increased consumer spending, which would contribute to GDP growth and modest employment gains.”

What’s even more interesting is that the CBO’s 2014 findings mirror the conclusions reached by EPI experts who studied past increases. In 2000, EPI studied the impact of increasing a minimum wage from what was then a paltry $5.15 per hour. Their findings were that, “No evidence exists that teenagers or less-than-high-school-educated adults lost work as a result of the 1996-97 minimum wage increases.”
EPI economists looked back over decades at previous minimum wage hikes and concluded, “Historically, analyses of the minimum wage’s impact on young workers have never shown the predicted large job-loss effects. The small negative employment effects found in past analyses diminish over time and are no longer statistically significant.”

It doesn’t make you a “socialist” to believe that middle and low-income people with more money to spend is good for the economy. Nor are you a “socialist” if you believe well-paid employees are critical to the success of a business.

Fair wage opponents will cite other studies to refute these. Between the Heritage Foundation, Americans for Prosperity, and the US Chamber of Commerce, there will be a number of contrary claims. But they have made the same arguments every time the minimum wage was increased since it was set at 25 cents an hour in 1938.

Sadly, their arguments, or more accurately the arguments made by their lobbyists (who are paid countless multiples of the minimum wage) are responsible for the fact that today the minimum wage paid to US workers is lower than that earned by workers in every economically developed nation in the world with the exception of Japan.

Meanwhile, Wyoming is one of only five states where the state minimum wage falls below the federal minimum.

There are good economic reasons to raise the minimum wage now. There is also a good moral reason. Franklin Roosevelt said it best. “No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.”

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