Raising the minimum wage would hurt the people it’s supposed to help
The argument in favor of raising the minimum wage to $15 an hour comes down to this: It’s hard to raise a family on $7.25 an hour, which, of course, is the federal minimum wage. One of the slogans of striking workers has been, “We are worth more.”
Those arguments, though, are emotional and make for good picket signs, but they don’t really stand up to scrutiny.
The fact is that raising the minimum wage by even a dollar or two an hour invariably hurts the people it’s meant to help — the young people just entering the work force and those with no or limited skills.
Many think of employers as Scrooge McDuck, jumping into a pile of gold coins in a vault somewhere, but they’re not. The fact is that employers, especially those with small businesses, have to stick to a budget, same as everybody else, and there’s only so much money to pay employees.
If you raise the minimum wage, then you can’t afford to hire as many people, and that means you’ll be a lot choosier about the workers you do hire. You can’t afford to take a risk on people with no skills or experience.
The research backs that up.
Last spring, economists at the University of Georgia and San Diego State University found that raising the minimum wage doesn’t do anyone much good, although I’d argue it probably helps a few cynical politicians score points with certain voters.
One of the economists who wrote the study, Robert Nielsen of the University of Georgia, said, “Regardless of who is looking at it … almost no one finds any positive effects for helping families through minimum wage increases … . As a policy tool, it doesn’t reach the right people.”
Contrary to what protestors — and their union benefactors — would have us believe, the research shows most of those earning minimum wage aren’t family breadwinners, and most aren’t actually poor.
In fact, about nine out of 10 workers who benefited from the last increase in the federal minimum wage lived in households with incomes that were at least two times over the poverty line.
But it isn’t simply that doubling the minimum wage would fail to help the poor. It’s that it would hurt the rest of the economy by resetting the clock on the economic recovery.
The U.S. jobless rate may be lower than it was at the depth of the recession, but at 7.3 percent it’s still well above what it was in early 2007, before the economy crashed. Illinois’ jobless rate is actually much higher than the national average, around 9 percent.
Small businesses in particular are wary of investing in workers right now. Each month, my association, the National Federation of Independent Business, releases its Small Business Optimism Index, based on a survey of small-business owners nationwide, and over the past several years, it’s shown that small businesses aren’t very optimistic.
The latest survey, released earlier this month, shows a 4-point decline in the number of small-business owners with job openings they couldn’t afford to fill — a troubling sign for what might lie ahead.
Those in favor of raising the minimum wage point to the success they’ve had in California, where the Legislature recently voted to raise the state minimum wage to $10 an hour. They’re hoping their victory in the Golden State will add momentum to efforts to pass increases in Illinois and elsewhere, but $10 in Sacramento isn’t the same as $10 in Springfield. Ten dollars is worth more here, which means it would take a bigger bite out of our economy than it does California’s.
Besides, the fact is that 95 percent of all employers in America already pay more than the minimum wage. Those that pay the minimum wage simply can’t afford to pay more for those positions.
Remember those picket signs saying, “We are worth more”? The reality is your skills are worth only as much as the marketplace says they’re worth. It’s supply and demand. If you’re doing something a lot of other people could do just as well, then you’re not going to get paid as much as someone with skills that are harder to find.
When the government forces new mandates on employers, it removes the flexibility they need to design compensation packages that work best for their individual situations.
While we all hope the economy picks up quickly and soon, we also know small business is looking at a lot of increased costs. Energy prices continue to increase, health insurance premiums remain on the rise, unemployment insurance costs are going up, workers’ compensation premiums are steadily increasing and small businesses are under the constant threat of new taxes from Springfield and Washington.
No matter what their friends in the labor unions are whispering in their ears, politicians who can’t seem to ever balance a budget have no business telling employers how much they should pay their employees.
Kim Clarke Maisch is Illinois state director of the National Federation of Independent Business. She lives in Springfield.