Minimum Wage: Facts
Proponents of artificial increases in the government-mandated minimum wage argue, among other things, that raising the hourly 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 raising the minimum wage will harm the very people it is intended to help.
MOST PENNSYLVANIA WORKERS DO NOT EARN THE MINIMUM WAGE, AND THE VAST MAJORITY OF THOSE WHO DO ARE NOT POOR.
- As of 2004, less than 1 percent of all American workers earned the minimum wage.
- In Pennsylvania, only 10 percent of all minimum wage workers are single parents or the single earner in a couple with children.
- Furthermore, the overwhelming majority of minimum wage workers are not the sole or primary earners in their families, nor are they living in poverty. Most of them either live with their parents or another relative, live alone, or have a working spouse.
- In Pennsylvania, nearly two-thirds (65%) of minimum wage earners are part-time workers, more than half (56%) are under 24 years old, and and 45.9% still live with their parents.
- The primary beneficiaries of a minimum wage hike in Pennsylvania will be workers with an average family income of nearly $50,000.
MINIMUM WAGE INCREASES DESTROY JOBS.
- Minimum wage increases destroy a number of existing jobs and inhibit the creation of new ones.
- According to an economic analysis by Dr. David Macpherson of Florida State University (see The Effects of the Proposed Pennsylvania Minimum Wage Increase), more than 2,800 jobs would be lost for people earning less than $25,000 if Pennsylvania’s minimum wage were increased by nearly 40%, from $5.15 per hour to $7.15 per hour.
- Business owners can respond to artificial increases in labor costs in only three ways:
- Pass along increased business costs to consumers through higher prices;
- Absorb increased costs by reducing profits (which is difficult for most small businesses already operating on thin profit margins; see examples here); or
- Reduce full-time jobs to part-time jobs, eliminate jobs entirely, or reduce/eliminate benefits such as health care.
- One of the reasons why labor unions typically support minimum wage increases is to tip the balance in favor of higher-skilled—and higher-wage—unionized workers.
- According to one union leader, “The purpose of the minimum wage is to … provide a floor from which we can upgrade your compensation through collective bargaining.” [Source: Edward T. Hanley in Catering Industry Employee, December 1977, p. 3. Cited in Belton M. Fleisher, Minimum Wage Regulation in the United States (Washington: National Chamber Foundation, 1983), p. 9.]
- The net result of minimum wage increases 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.
CONTRARY TO SUPPORTERS’ CLAIMS, THE ECONOMIC EVIDENCE IS THAT MINIMUM WAGES HARM LOW-WAGE WORKERS.
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. 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.
MINIMUM WAGES ARE COUNTERPRODUCTIVE FOR BUSINESSES AND WORKERS ALIKE BECAUSE THEY LIMIT ECONOMIC FREEDOM.
- In a competitive 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.
- According to a study by economists at Florida State University and Miami University of Ohio, full-time workers hired at the minimum wage received a median pay increase of 13 percent within their first year—undermining the claims of minimum wage hike advocates who claim that government-mandated increases are the only way to raise the incomes of low-wage 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.
- The Effects of the Proposed Pennsylvania Minimum Wage Increase
- Characteristics of Minimum Wage Workers: 2004
- Minimum Wage Politics, Bad Economic Policy
- Rendell Minimum Wage Plan Will Cost Jobs
- Singin’ Those Car Wash Blues
- Is Minimum Wage Bad Policy?
- Who Pays for the Minimum Wage Hike?
- Minimum Wage Hike: “Attack of the Economically Ignorant”
- House Democrats Star in “Groundhog Day”
- The “Living Wage” Falls Short on Promises