BRIEF: No Federal Minimum-Wage Hike

Background: President Obama and some members of Congress have proposed raising the federal minimum-wage from $7.25 an hour to $10.10 an hour. Presidential candidates Hillary Clinton and Bernie Sanders want an even higher increase to $15 an hour. Proponents of raising the minimum-wage argue that doing so will increase wages for low-income workers and ultimately stimulate the economy as those workers spend more money. While individuals supporting a minimum-wage increase may have good intentions, economics tells us that raising the minimum-wage harms the very people it is attempting to help. Increasing the federal minimum-wage raises the cost of hiring low-skilled labor – the very people working minimum-wage jobs. To compensate for higher labor costs, businesses will most likely respond by laying-off employees and offering fewer entry-level jobs.

Minimum-Wage Workers: Politicians and interest groups calling for a federal minimum-wage hike would have you believe the vast majority of minimum-wage workers are either very poor, single parents, or stuck earning the minimum-wage their entire life. This is simply not true. Most minimum-wage workers are young adults and are not the primary income earner for their families. Only 4 percent of minimum-wage workers are single parents. Over half of minimum-wage earners are between the ages of 16-24, two-thirds of minimum wage earners work part time, and the average family income of a minimum-wage worker is $53,000 a year – well above the poverty line.

Destroying Employment Opportunity: The primary benefit of a minimum-wage job is to teach low-skilled and inexperienced workers basic employment skills. A minimum-wage job is the first rung on the ladder of economic mobility. Over half of all Americans start their career making within $1 of the minimum wage, but within just a year of employment, two-thirds earn raises. Macro-economic models demonstrate that a hike in the federal minimum wage reduces employment by nearly 300,000 jobs a year. According to the Congressional Budget Office (CBO), raising the minimum wage to $10.10 an hour could reduce employment by up to 1 million workers. The federal government should not be in the business of taking away 1 million opportunities for low-skilled workers to raise themselves out of poverty.

Solution: The evidence is clear. Raising the federal minimum wage would raise the cost of low-skilled labor and cause businesses to lay off workers and hire fewer low-skilled employees. This would be devastating to inexperienced workers looking for employment opportunities in an already stagnate economy. Congress should reject attempts from lawmakers to raise the federal minimum wage.

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