“NO” on Federal Minimum Wage Increase

This week, the Senate will vote on the Minimum Wage Fairness Act (S. 2223) sponsored by Sen. Tom Harkin (D-IA).  The bill would increase the federally mandated minimum wage to an unprecedented $10.10 per hour from the current $7.25 per hour by early 2016 and subsequently index it to inflation, which would force employers to curtail hiring.

Proponents of the minimum wage increase argue the current minimum wage is “drastically lower than it should be and that [it] has not kept pace with inflation and productivity growth,” but the minimum wage has tracked closely with the productivity growth of the jobs normally filled by minimum wage workers.  The Heritage Foundation explains:

Prices and productivity growth vary significantly across sectors, and productivity growth in the service sector—which houses many minimum-wage jobs—has historically been very low.

Despite claims that the minimum wage should be significantly higher, an examination of the data shows that the minimum wage has in fact quite closely tracked the productivity growth and output prices of jobs that are usually filled by minimum-wage workers.

Moreover, most minimum wage workers are between the ages of 16 and 24 and not supporting families. Heritage notes:

The vast majority of minimum-wage workers are second (or third or fourth) earners in their family. Minimum-wage jobs are entry-level positions, primarily filled by unskilled and inexperienced workers. Many minimum-wage workers are between the ages of 16 and 24, and two-thirds work part-time.

The proposed increase in the minimum wage would also harm the very same workers it is intended to help by discouraging employers from hiring new, entry-level workers.

The nonpartisan Congressional Budget Office indicated in a February report the increase would result in the loss of 500,000 jobs.  Heritage explains, “Businesses would respond to this increase the same way they respond to other cost increases—by purchasing less of the more expensive good or service.”

Heritage adds “almost three-fifths of minimum-wage workers have no more than a high school education, and half are under the age of 25.”  Minimum-wage jobs give these workers the skills necessary to advance in the workplace.

Once workers gain these skills, they become more productive, and most quickly earn raises or move to higher-paying jobs. Over two-thirds of workers starting out at the minimum wage earn more than that a year later.Minimum-wage increases saw off this bottom rung of many workers’ career ladders.

In an already weak economy, this legislation, which is based on faulty arguments, would make it more difficult for Americans to find jobs that give them the skills necessary to climb the economic ladder.

Heritage Action opposes the Minimum Wage Fairness Act (S. 2223) and will include it as a vote on our legislative scorecard.

Related:

Heritage Action Scorecard
Unprecedented Minimum-Wage Hike Would Hurt Jobs and the Economy
Few People Actually Raise Families on
Minimum Wage Has Followed the Productivity and Prices of Minimum Wage Jobs
Minimum Wage Hike Would Eliminate 500,000 Jobs