Re-Blogged from www.CEI.Org By Ryan Young
The minimum wage is one of the most popular policies for fighting poverty, and proposed increases to it usually poll very well. The $7.25 per hour federal minimum wage hasn’t increased since 2009, so now many states are enacting their own minimum wage hikes. Twenty states are inaugurating 2015 with new increases.
Danielle Paquette’s recent Washington Post opinion piece, “20 states just raised the minimum wage. It wasn’t enough,” rounds up many of those increases, which range from Florida’s 12-cent hourly hike to as much as $1.25 per hour. Already, the New Year increases are “fattening the wallets of about 3.1 million Americans,” Paquette argues. A similar December 31 New York Times opinion piece by Rachel Abrams carries the headline, “States’ Minimum Wages Rise, Helping Millions of Workers.”
That sounds about right, as far as it goes. Roughly 2 to 3 percent of U.S. workers earn the minimum wage. With a late 2014 labor force of 156 million people, 3.1 million fatter wallets is in the right ballpark. Yet, these minimum wage increases will not help reduce poverty. Why? The reason is tradeoffs.
Paquette and Abrams only tell half the story. Millions of workers are getting a raise, but those raises come at a cost. Other workers directly pay for those raises through reduced hours, firings, benefit cuts, and other harms. Those workers and would-be workers have few defenders. My colleague Iain Murray and I recently compiled some of the many costs to these neglected souls:
Workers are fired, hours are cut, jobs are not created, non-wage perks, including insurance, free parking, free meals, and vacation days evaporate, annual bonuses shrink, prices rise, (squeezing minimum wage earners themselves), big businesses gain an artificial competitive advantage over their smaller competitors, and crime rates rise. It is a bleak litany.
Are those tradeoffs worth it? That is a value judgment each person needs to make on