House Democrats Star in “Groundhog Day”

This week marks Groundhog Day in Punxsutawney, Pennsylvania—the day that the world’s most famous groundhog emerges from his hole to tell us whether or not we can expect an early spring.

Hundreds of miles away, it’s “Groundhog Day” in Harrisburg as well—but more in the manner of the 1993 film starring Bill Murray. Fans of the movie will recall that Murray’s character, a Pittsburgh television weatherman named Phil Connors, is stranded overnight in Punxsutawney by a blizzard, wakes up the next morning to find that it’s still February 2, and is then forced to repeatedly relive that day until he succeeds in reforming his life.

The House Democrats advancing the latest proposal argue, among other things, that an increase in Pennsylvania’s minimum wage will help to lift families with children out of poverty and have little to no negative impact on employment. The economic evidence and demographic data, however, contradict those claims and show how this attempt to nullify the law of supply and demand is destined to harm the very people it is intended to help.

First of all, as of 2003, less than 1 percent of all American workers earned the minimum wage. In Pennsylvania, according to a 2004 Employment Policies Institute (EPI) analysis, only 11 percent of all minimum wage workers are single parents or the single earner in a couple with children. Indeed, the overwhelming majority of minimum wage workers are not the sole or primary earners in their families, nor are they living in poverty. To the contrary, most of them either live with their parents or another relative, live alone, or have a working spouse. Therefore, the primary beneficiaries of a minimum wage hike in Pennsylvania, according to EPI, will be workers with an average family income of nearly $50,000.

Second, while a minimum wage increase will raise the incomes of affected workers who continue to be employed, it will also destroy a number of existing jobs and inhibit the creation of new ones. How is this so? The economic reality is that unless business productivity increases sufficiently to generate enough revenue to pay the higher minimum wage, affected businesses will have to spread the same amount of money over fewer workers. The net result is that the least skilled workers in the labor pool will be the first to lose their jobs. These same workers will also find it more difficult to get and keep a new job.

Still, in 2004, two Duke University economists tested the claim of minimum wage hike proponents that job losses do not follow such artificial wage increases. They constructed a model which—contrary to centuries of settled economic theory and practice—assumed positive employment effects from a minimum wage increase. But even under this rosy scenario, the two economists found that those workers who place the highest value on minimum wage jobs—current minimum wage employees–had a higher probability of being unemployed as the result of a minimum wage increase, and that all minimum wage increases under the alternative model resulted in decreased job prospects for individuals.

Finally, minimum wages are counterproductive for businesses and workers alike because they limit economic freedom. Due to the competitive nature of the labor market, workers are free to take their services elsewhere if they don’t like an employer’s offer. At the same time, businesses have an incentive to pay competitive wages and benefits if they want to attract quality workers. A government policy that limits the ability of both individual workers and job providers to freely negotiate a wage rate agreeable to both parties creates economic losses that ripple outward and reduce statewide economic growth.

“Groundhog Day” was a very funny movie—but the House Democrats’ version is no laughing matter for Pennsylvania’s workers and businesses. Indeed, their minimum wage increase plan should follow Punxsutawney Phil back into his hole—where its long shadow can never darken Pennsylvania’s economic future again.

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Grant R. Gulibon is senior policy analyst at the Commonwealth Foundation (, an independent public policy research and educational institute based in Harrisburg, PA. Permission is hereby granted to reprint in whole or in part, provided the author and his affiliation are cited.