Economists agree wage hike will hurt

Published on Sunday, 23 March 2014 22:08 - Written by

This really shouldn’t be news to anyone. But a new survey shows that if Congress raises the minimum wage, businesses will put off hiring and some would be forced to pay off workers. It’s simple math, really. Companies have to keep to budgets, as well.

“Just over half of U.S. businesses that pay the minimum wage would hire fewer workers if the federal standard is raised to $10.10 per hour, according to a survey by a large staffing firm to be released Wednesday,” the Wall Street Journal reported last week. “About 54 percent of minimum-wage employers would reduce hiring if the federally mandated rate increased by $2.85 per hour. A smaller share — 38 percent — said they would lay off employees if the wage increase favored by President Barack Obama becomes law.”

The poll was conducted by Express Employment Professionals, a large temp firm. Some in Congress immediately responded with questions about the poll’s fairness, but it confirms what the Congressional Budget Office estimated last month.

“A report from the nonpartisan Congressional Budget Office, released last month, found a jump to $10.10 per hour would cost the U.S. about 500,000 jobs by the second half of 2016,” the Journal pointed out.

Those aren’t the only studies that show the economic reality of the president’s proposal.

“Increasing the minimum wage nationwide to $10 per hour would lead to substantial job losses among retail, service and manufacturing firms, according to U.S. chief financial officers,” a Duke University/CFO Magazine Global Business Outlook Survey found. “Among firms that indicated whether a wage hike would affect their hiring, nearly half of retail firms (47 percent) and approximately one-third of service and manufacturing companies said they would reduce jobs if the minimum wage rose to $10.”

And last fall, a Wells Fargo/Gallup found the same thing — if companies are forced to increase employee pay, they’ll be forced to decrease employee numbers.

The conclusion here is clear. A mandatory minimum wage hike sounds great, until you look at the effects of Congress giving people a raise with someone else’s money.

“So, for some workers, sure, the higher minimum wage will be nice,” said Katrina Trinko of the Heritage Foundation. “But for plenty of other workers — for example, those who would prefer to make the current minimum wage of $7.25 an hour rather than nothing at all — Obama’s minimum wage hike is a lousy deal.”

President Obama said in a Dec. 13, 2013 speech that there’s no proof a wage hike would cost jobs.

“Now, we all know the arguments that have been used against a higher minimum wage,” he said. “Some say it actually hurts low-wage workers — businesses will be less likely to hire them. But there’s no solid evidence that a higher minimum wage costs jobs, and research shows it raises incomes for low-wage workers and boosts short-term economic growth.”

Here’s the solid evidence — from survey after survey, economist after economist. Raising the minimum wage will raise labor costs on businesses that can ill afford those costs. And that will cost jobs.